How to move up the property ladder

If you’ve been in your first home for a while, you may be starting to think about your next move. Maybe your family is growing and you need a bit more space, or you’d like to move to a different area.

Here are a few tips to keep in mind if it’s time to move up the ladder.

How much more can you afford?

If you’re moving on, you may well be looking at buying a more expensive property. To work out what you can afford, it can help to get an appraisal of your existing property from a few real estate agents to determine what it might sell for, and chat to a mortgage adviser about how much you’d be able to borrow for your next place.

If you’ve built up a decent chunk of equity in your house that can be carried over as the deposit for your new place, you may find your borrowing power has increased noticeably. You can then talk through with your adviser what sort of repayments you’d be looking at, which will also impact your borrowing power.

Do you want to sell or keep your existing property?

Some people decide that, rather than selling their first house, they’ll keep it and rent it out while they move to another. If you’ve built up enough equity in your property, that can be a worthwhile option to consider.

It helps to think about whether it stacks up from a financial point of view, though, rather than an emotional one. You may be attached to your house and want to hold on to it. But you’ll need to think about things like how much rent you could get, how much maintenance the house needs and how you’d feel about having tenants living in the property.

We can help you look at what your borrowing options would be in both scenarios.

Buying with a sale condition

Lots of people moving from a first to second house make an offer on their next place that is conditional on the sale of their home. This can be good because it gives you the security of knowing you have a house lined up to move to once you sell. But if the market is moving more slowly, it can mean a lot of transactions stacked up waiting for one to move. Sellers sometimes look less favourably on offers that are conditional on a sale.

Consider the costs

You’ll need to budget for some extra costs if you’re selling and buying again. There will be real estate commission and marketing costs for the sale of your existing home, legal fees for both deals, and moving costs.

Substituting security

If the settlement date for your purchase of your new home aligns with the sale of your existing one, you may be able to substitute the security of your home loan, allowing you to retain any fixed terms you currently have in place. We can work through this with you. If this doesn’t work, and you end up breaking a fixed term, we can help you work out whether you will need to budget for any break costs.