If you have bought property before, you might think that upgrading your property is a lot easier the second time around… maybe, but probably not. Sure, you have a bit more knowledge and skill than before, but this time you need to sell a home as well as buy one, and that adds new challenges to navigate. So upgrading your property requires careful planning and consideration.
This comprehensive guide will walk you through everything you need to know before making the move.
1. Assess Your Reasons for Upgrading
Understanding why you want to upgrade is the first crucial step.
- Space Requirements: Are you running out of room due to a growing family or the need for a home office?
- Lifestyle Changes: Perhaps you desire a different neighbourhood, better schools, or proximity to work. That could mean a move to a nearby suburb or to the country or even interstate.
- Investment Goals: Upgrading can be a strategic move to increase your property’s value over time.
Actionable Tip: List your primary reasons for moving. This clarity will help guide your decisions throughout the process.
2. Evaluate Your Financial Situation
Upgrading often means taking on a larger mortgage, so a thorough financial evaluation is essential.
- Budgeting: Determine how much you can afford, considering not just the purchase price (and the loan repayments that will go with that price) but also any new ongoing expenses (higher rates, extra transport cost etc).
- Equity Assessment: Calculate the equity in your current home to understand how it can contribute to your new purchase (more about this at 5 below).
- Credit Check: It is helpful to know that your credit score is strong and that you don’t have any issues here that might get in the way of your plans.
Actionable Tip: Use online mortgage calculators to get an estimate on loan repayments and consult a mortgage broker, ask them to review your numbers and discuss your plans more broadly (and to run your credit report for you).
3. Understand the Current Market Conditions
The property market fluctuates, and timing can impact your buying and selling experience.
- Seller’s Market vs. Buyer’s Market: In a seller’s market, you may get a better price for your current home but face higher prices when buying.
- Interest Rates: Lower interest rates can make upgrading more affordable.
- Economic Indicators: Employment rates and economic growth can influence property values.
Actionable Tip: Keep an eye on real estate reports and consider subscribing to market analysis newsletters.
4. Decide Whether to Sell or Rent Out Your Current Property
As you look to upgrade have you considered whether keeping your first property is an option or whether you have to sell.
- Selling: Provides immediate funds for your new purchase but means relinquishing the asset which might appreciate in value over time.
- Renting: Generates ongoing income but comes with landlord responsibilities.
Actionable Tip: Evaluate your financial circumstances and your ability to hold the current property whilst also buying your next home. As part of which consider both the potential capital growth from the existing property and also the viability of renting the property out (what rental income can you expect, is the market strong and is the property desirable for renters).
5. Get a Professional Property Valuation
Understanding the true value of your current home is vital.
- Appraisals: Consult a real estate agent or Vendor Advocate to get the value of your property appraised. A bank valuation also provides a good second opinion so that you have a clear and balanced idea of what your current property is worth.
- Comparative Market Analysis (CMA): Real estate agents and Vendor Advocates can provide a CMA based on recent sales in your area so you can see (and second guess) the data used in forming their valuation/estimate.
Actionable Tip: Obtain multiple valuations to ensure you have a realistic price range.
6. Calculate All the Costs Involved
Upgrading comes with various expenses beyond the purchase price;
- Stamp Duty: A significant cost that varies by state and property value.
- Moving Expenses: Include hiring movers, packing supplies, and potential storage fees.
- Legal Fees: Conveyancing and solicitor costs for handling contracts.
- Inspection Costs: Building and pest inspections for the new property.
- Renovations and Repairs: Immediate work needed on the new home.
Actionable Tip: Create a detailed budget that accounts for all these expenses to avoid surprises.
7. Secure Pre-Approval for a New Mortgage
A mortgage pre-approval gives you a defined plan of attack, sets your budget, gives you confidence in your plan and strengthens your position as a buyer. In getting a pre-approval consider;
- Borrowing Capacity: What will lenders allow you to borrow? What can you afford to borrow? Think about these things for both now and the future. At today’s rates and if rates go up
- Loan Options: Explore different mortgage products that suit your financial situation.
- Interest Rates: Compare fixed and variable rates.
- Loan Features: What loan features do you need? Offset accounts, redraw facilities, flexible repayment options, branch access, internet banking/mobile banking app.
Actionable Tip: Work with a mortgage broker to navigate the lending landscape, find the right loan and a good deal.
8. Define Your Must-Haves and Nice-to-Haves
Knowing what you need in your new home will streamline your search.
- Non-Negotiables: Number of bedrooms, location, school district.
- Preferences: Garden size, modern kitchen, additional amenities like a pool.
Actionable Tip: Create a checklist to evaluate properties systematically.
9. Research Potential Neighbourhoods
The right location can significantly impact your satisfaction and investment value.
- Amenities: Proximity to family, shops, parks, schools, public transport, and healthcare.
- Safety: Check local crime rates.
- Future Developments: Upcoming infrastructure projects can enhance property values.
Actionable Tip: Visit neighbourhoods at different times of the day to get a feel for the area. Also talk to people who live in the area for their insights.
10. Conduct Thorough Due Diligence on the New Property
Before committing, ensure the new property meets all your expectations.
- Building Inspection: Identify structural issues or defects.
- Pest Inspection: Check for termites and other pests.
- Title Search: Ensure there are no encumbrances or restrictions.
Actionable Tip: Get experts to check out the property and make sure (as far as possible) that the property is sound and has no major defects or issues that would make buying the property a mistake, or at very least (unexpectedly) cost you a lot of money to fix.
11. Understand Legal and Contractual Obligations
Property transactions involve complex legalities.
- Contracts of Sale: Have your solicitor or conveyancer review all contracts thoroughly and if need be, negotiate to add/remove/alter the terms and conditions
- Cooling-Off Periods: Know your rights regarding contract cancellations.
Actionable Tip: Never sign any document without professional legal advice.
12. Plan the Sale of Your Current Home
If selling your current home, strategise to maximise your property’s appeal. It can make a big difference to the final sale price achieved.
- First Impressions Count: This applies to property as much as it does to people. Think about how your property presents from the street and in the entrance
- Home Staging: Professional staging can make your home more attractive to buyers (I have seen people fall in love with a place more because of the furniture and art than the actual home itself)
- Repairs and Upgrades: Fix any issues and consider minor upgrades for better returns.
- Marketing Strategy: High-quality photos, online listings, and open houses.
Actionable Tip: Engage a reputable real estate agent who specialises in your area and/or a Vendors Advocate to help you to get the best results on selling. They are well placed to advise you on where to spend time, effort and money as you look to maximise the sale of your property.
13. Timing the Sale and Purchase
Coordinating the sale of your current home with the purchase of a new one can be tricky.
- Be clear what your options are and set a plan: Do you plan to sell first, then buy or the other way around? Do you need/want bridging finance? Can you get bridging finance?
- Bridging Loans: Temporary financing if the purchase settles before the sale.
- Settlement Dates: Negotiate dates that align as closely as possible. If you can get both transactions to settle on the same date then there will be no need for bridging finance.
Actionable Tip: Work closely with your solicitor and real estate agent to synchronise timelines.
14. Plan for Moving Day
An organised move reduces stress.
- Declutter: Sell, donate, or dispose of items you no longer need.
- Packing Strategy: Label boxes clearly (with what is inside and which room they are to delivered into in the new home) and pack systematically.
- Utilities Transfer: Arrange for the disconnection and reconnection of services. You dont want to move into the new home and have no hot water!
Actionable Tip: Create a moving checklist and timeline to keep track of tasks.
15. Update Your Insurance Policies
Protect your new investment.
- Home Insurance: Organise home insurance for your new place. Your lender will need its name noted on the policy as the Mortgagee. Whist you technically only need coverage to be effective from the settlement date many take the cover out earlier.
- Contents Insurance: Update the value and inventory of your belongings.
- Life and Income Protection: Review policies in light of your new financial commitments.
Actionable Tip: Shop around for home insurance providers to get the best coverage at competitive rates and consider talking to a financial planner who specialises in Life/Income Protection insurance about the cover you ought to consider and how to best structure it (inside super or not etc)
16. Notify Relevant Parties of Your Move
Keep everyone in the loop.
- Mail: Set up mail redirection with Australia Post.
- Government Agencies: Update your address with the electoral roll, Medicare, and the ATO.
- Service Providers: Notify banks, employers, schools, and subscription services.
- Move Direct Debits: If you have set up your home loan and banking with a new provider you might need to move direct debits to come from your new accounts
Actionable Tip: Use a checklist to ensure no one is overlooked.
17. Settle into Your New Home
Make the transition smooth and enjoyable.
- Security Measures: Change the locks and consider installing a security system.
- Utilities Setup: Confirm that electricity, gas, water, and internet are operational.
- Neighbour Introductions: Building good relationships can enhance your living experience.
Actionable Tip: Take time to familiarise yourself with the local community and services.
18. Review and Adjust Your Financial Plan
Review your financial position 3-6 months post-move to reassess your finances and if things are “going to plan”.
- Budget Update: Adjust your budget and ensure it reflects the new mortgage payments, property expenses and living expenses.
- Emergency Fund: Ensure you have funds set aside for unexpected costs.
- Long-Term Goals: Review your financial planning with future aspirations in line with your adjusted budget.
Actionable Tip: Consult with a financial advisor to optimise your financial health.
Conclusion
Upgrading your home is a major undertaking and there are so many steps to navigate. By carefully considering working through this guide, you can navigate the complexities of buying and selling with confidence. Remember, thorough preparation and professional advice are your allies in making this transition as smooth as possible.
Ready to Make the Move?
As seasoned mortgage brokers, we’re here to support you through every step of your upgrading journey. Contact us today to explore your financing options and turn your dream home into a reality.
