Aug 3 2010, 02:43 PM
We are just after a bit of advice/wwyd Atm
Our situation currently is I am a SAHM and hubby works full time. We own outright our house which we anticipate being able to get about $350kish for. What we want to do is buy a new house that is a bit bigger which we were looking around the max of $450k. So basically that would mean we would need a mortgage of about $100,000.
This is where we are not sure, basically are we best of selling our existing home and then purchasing a new one with the sale proceeds or would a bank let us take a mortgage on a new house while the existing is on the market. Do they do this? How does it work for people in this situation?
Aug 3 2010, 04:23 PM
The quick answer is that it depends on your borrowing capacity.
If your hubby earns enough to obtain a 450K loan, you can use the equity in your current home to use as the deposit funds for the new place. this can either be done by cross-collaterisation or obtaining two separate loans - one for the equity in your current home and the second for the new home loan. When you sell you can then put those proceeds into the loan account to pay it down. To reduce your repayments down to a 100k loan over say 30 years you would most likely need to refinance. Potential rental income of the first place will be counted toward the borrowing capacity so it may be possible to borrow the entire amount.
The majority of people will apply for a loan while their house is on the market. this then gives you the comfort that you can obtain the loan. The condition of this is that the first house must be sold at the time of purchasing the new one as those funds will be going toward the property purchase. This usually works best if you ask the new owners for a day or two's grace before moving out (usually paying them rent for a few days) so the settlements don't have to be done at the same time and you're not sitting in the removalist truck hoping that the sale of your place goes through on time.
Signing a contract before selling can be scary, particularly if it stretches your finances to have two mortgages on the go. But on the other side of the coin, if you sell your place without a place to go to, that can be very stressful too.
Sometimes my clients will ask for a longer settlement period on the house they are purchasing to give further time to find a buyer for their place. A house is always saleable, but the price people are willing to pay may not be what you are prepared to part with it. By having another place ready to go, you may need to sacrifice a high price to ensure it sells before settlement of the second.
Hope this rambling reply helps a little. If you have any particular questions, happy to answer them.