Pre-Sale Finance Health Check
A typical home loan in Australia runs for 15-30 years however homeowners regularly sell their properties before the loan has been paid off. Most sellers therefore still have a mortgage on their property when they go to sell. Understanding exactly where you sit financially is important. You need to clearly understand how much you still owe your lender, how much money you need to sell your property for to cover the loan and in turn formulate an idea around how much you may have to purchase another property.
Understand your current home loan situation
The first step is to contact your lender and ask them to provide you with a summary of how much you have owing on your property. Your lender can provide you with a payoff quote detailing this, so you know exactly how much money you need to pay back, along with fees and charges. Keep in mind some lenders have an early payment penalty if you sell too early, so make sure you seek clarity around this.
In an ideal scenario, you will sell your property for more than you owe your lender so you can easily pay off your loan balance. In this situation, your conveyancer will simply prepare loan closing documents and a settlement statement and when the buyer pays for the property, the funds are used to pay the balance on your loan and any additional fees you owe for the sale. The remainder goes to you as your proceeds.
If you sell your property for less than you owe on your mortgage, make sure you discuss re-payment options with your lender.
Same day, simultaneous settlement is ideal. This is when the sale of your current property and the purchase of your new home happen on the same day, so the funds just move from one loan to the other. It also means you won’t have to pay two mortgages at once, or rent a place in between selling and buying.
If this is not possible the team at Oxygen Home Loans can discuss other options such as bridging finance, which we detail below, to cover you between purchase and sale.
If you’ve bought a home before you have sold your other property you most likely will need a bridging loan. A bridging loan provides you with the funds you need to buy your new home before you have sold your current property. These loans are typically interest only and for a limited loan term.
Keep in mind you will need to pay your original home loan and the bridging finance loan at the same time. You will have to show evidence that you can repay the bridging finance interest costs during the period between buying and selling. To connect with our Oxygen Home Loans team to discuss bridging finance options click here.
Estimate your costs to sell
There are a number of costs you should budget for when selling. Here is a snapshot of the key costs associated with the sale to help with your budgeting:
- Legal / conveyancing fees
- Professional photography of your property
- Costs for marketing your property
- Agent commission
- Property styling
- Property repairs
- Moving cost
Financing your next purchase
If you are looking to purchase a new property quickly after the sale, having pre-conditional approval for a new home loan is a good idea. Pre-approval essentially is an approved loan amount, usually for a particular time period. Knowing this enables you to confidently sell your property knowing you will be able to buy a replacement property once you’ve sold.
To discuss your options, and to get pre-conditional approval for a new home loan talk to our team at Oxygen Home Loans here.
This information is provided subject to our Terms and Conditions.