How to upsize your family home

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We all know about the struggles of first-home buyers in today’s property market, however, there is a new group in an equally precarious position: those with “honey, I grew the kids and shrunk the house” syndrome. Lance explores how this group can upsize their home.

 

Here’s one of the main issues facing the upsizing family: Current housing market has meant that buyers with the least (read: zero) conditions win in the offer process. So, then, how do you purchase your next home without the fear of not only you becoming homeless, but also displacing your family? This hurdle facing the upsizing family stems the flow of smaller homes ideally suited to the many despairing first-home buyers.

 

So I propose three potential solutions for the too-small-home owner:

 

1.  Put in an offer conditional to sale of your existing property

In the Wellington property market of early 2018, there seems to be an ever so slight sway back towards favouring the purchaser. This is giving buyers more space to negotiate terms, particularly if the property has quirks. This being said, an offer subject to the sale of your property is not the most attractive term. It could take weeks to sell your smaller home, and there is no guarantee for the vendors that this will ever take place.

 

2.  Sell your home first

Sell your home, move to a rental (note, there are no rentals) with your family and hope to get back into a larger property. Now, I have a five-year-old daughter, and a two-year-old son, and as a parent the risk involved in such a move can just be paralyzing. What if we price ourselves out of the market? What if we can’t rent near their school/day care/work?

One of the benefits, of course, is that you are ready to offer (if you are not under a fixed rent agreement)—you have your cash in your hand and are ready to pounce!

 

3.    Bridging finance 

There are a couple of types of bridging: Open and Closed.

 

Closed bridging is when you have a sale date already confirmed for your current property and you wish to settle on a new property sooner than your current property is sold.

 

Open bridging is when you wish to cement an unconditional offer of purchase before you have a confirmed sale date on your current property.

 

Although both can be difficult to obtain, the questions the banks need answering over the bridging phase are as follows:

·      What is the equity position (the difference between your loan and the value of the property/s)? (the more equity the better)

·      Do you have access to cash for covering payments on both loans for an extended period of time?

·      You’ll often also need to provide valuations on both properties to confirm the likely sale price and demonstrate job security and income.

As always there are multiple considerations both in your personal situation and in partnering you with the right bank. Currently we know a couple of banks who have a greater appetite for bridging finance than others. If you would like to discuss the possibilities of bridging finance be sure to contact us at Velocity Financial and confirm whether this is an option for you.

 

Lance Shearman is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A Disclosure Statement is available free of charge upon request