Mortgage Matters

6 mortgagematters

Should I sell first or buy first?

I’m often asked which is the better way round to do things. Should you sell before buying or buy before selling? This is a common dilemma, as properties just aren’t selling as quickly as they were and the banks’ attitudes to bridging finance have shifted. Let’s explore a hypothetical example: say you have a home worth $1m to sell, with mortgage finance of $400k, and you are looking to pay $1.2m for your next home.

Buying before selling scenario: You’ll need to secure finance for the purchase without having sold your current home. Hence, you could find yourself with mortgage finance of $1.6m (existing finance of $400k plus bridging finance of $1.2m), until you sell your $1m property. Such a situation can lead to huge financial pressure if you can’t sell quickly.

Selling before buying scenario: If you can achieve an unconditional sale of your current home before you buy your next home, you will know how much money you have to play with. However, if you’re unable to find the home you want to buy before the sale settlement of your current home, you will need to find yourself a temporary place to live. This might mean renting or perhaps moving in with family for a while. Another option is the conditionally buying before selling scenario: With this option, you contract to buy your next home on the condition that you sell your current home within an agreed timeframe. You will know exactly how much you need to sell for. The main risk with this option is that most vendors (sellers) will be advised to include an escape clause so that, should they receive a better offer than yours, they can give you notice to either make your offer unconditional or walk away. There are also risks associated with timing – we advise you to seek legal advice to ensure there are appropriate clauses in your offer to fully protect yourself.

Wayne Lawrie is a Registered Financial Adviser specialising in mortgages. Based locally, he provides FREE advice to both sellers and buyers. Give Wayne a call on 09 428 2223 to discuss your situation or to request a copy of his disclosure statement email enquiries@ mortgagestutdio.co.nz.

Looking to buy your first or next home? Wondering whether you can do better than your current mortgage? Advice from a specialist Mortgage Adviser could save you time and money. Best of all, it’s free!

Contact the Mortgage Studio team today. We’re here to help you.

Wayne Lawrie Morgan Moore Jo Hook

Ph: 09 428 2223 | Mob: 027 470 9990 |Email: enquiries@mortgagestudio.co.nz | www.mortgagestudio.co.nz | www.facebook.com/MortgageStudioLimited

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