If you think your family has started to outgrow your home, it might be time to consider something with more room. A growing family is one of the most common reasons we hear from our customers who are choosing to upsize their home and it can encompass anything from a new baby, children moving into their teenage years or elderly parents re-joining the home.
Before you make any decisions, it’s always worthwhile to consider all the costs involved in upsizing your home. Speak to your bank, a financial advisor, or our team at Foundation Finance to ascertain your personal circumstances and establish how much you can spend on upsizing your home.
As a general rule of thumb, banks will consider 80% of your equity as usable
Many people are able to upsize using the equity they’ve accumulated from their first home. Equity is the difference between the value of your home and the amount remaining on your mortgage, excluding any interest.
You may have equity from mortgage repayments or from the value of your home increasing through renovations or simply the market improving. Generally, banks consider 80% of your equity as usable, but they will take a number of factors into account including income, age, number of dependents and any debts you may have.
Are you after an entire change of scenery? Or perhaps you like your neighbourhood and it’s just a bigger house you’re after? (If it’s a bigger house, have you considered a knock down rebuild?) If it’s a new location, consider what’s most important to you. Is it to be closer to schools, transport, your workplace, or perhaps you would like a bigger backyard? If you’re unsure of a location or are still deciding, our sales consultants can work through all of this with you.
This one comes down to what you can afford. While property investment can be a great way to secure growth in your wealth, you need to make sure you can afford to pay to hold both properties and that you’re not stretching yourself too thin.
If you decide to buy your next home before you sell your previous home, you may require bridging finance. As the name suggests, a bridging loan bridges the gap between securing a mortgage for a new property before you sell an existing property. Bridging finance offers short-term access to funds at a sometimes higher rate of interest. Bridging loans can be risky, if you don’t sell your home in the time frame you hoped, you may need to sell for less so you don’t find yourself paying more in the bridging period than you can afford.
The information provided is meant as a guide only. Porter Davis recommends that all clients seek independent legal, tax and financial advice. Full T&Cs here
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