Reasons to Refinance: #4 To Build or Buy Your New Home
Is it time to move on?
It may be time to move on from your current home. Perhaps it's too small, or too big, in the wrong location for this point in your life, or you just need a change of scenery and renovating isn't your thing.
Whatever the reason, your house hunting will be so much easier if you know how much you can borrow, so you know what you can afford to spend on your upgrade.
And doing your homework now will also help you to be clear on whether you can afford to build or buy your new home before you have to sell your current home.
Researching your options now could save you money on renting a new place in between, or help you prepare for bridging finance if you are going to maintain two loans during the changeover. It could also open up the option of home-to-home finance.
Can you build or buy your new home before you sell your old one?
The short answer is yes, so long as you have enough equity in your current home. If not, then you will most likely need to sell first.
Although there are many houses out there to choose from at any point in time, sometimes the one you want, 'the one', will sell to someone else if you don't act quickly. If that's the case for you, then you may be able to access something called home-to-home finance, which would allow you to build or buy your new home before you sell your old one.
With this option you stay living in your current home - there is no need to move into a rental, only to move out again at the end of your build. It simplifies the process of moving home, which is said to be one of the most stressful times of our lives, reducing the upheaval involved in shifting the family as you only move once. And you won't be paying off two mortgages at once.
So what if you decide to build your new home?
If you're building a home, you might want to refinance to a home loan with a construction option.
Houses are generally built and paid for in a five stage process: 1)Land Purchase, 2)Pad, 3)Roof, 4)Lock up, and 5)Final Finishes.
At the completion of each stage, a valuer from your lender checks the work and approves the payment of that portion of the cost, so you don't need to have the full amount of the loan drawn down all at once. This means that you aren't making interest repayments on the entire amount, just on the amount you've drawn down to date. Cool, huh?
Pro Tip: Do Your Homework - If you want to build and need to apply for a construction loan, then lenders will ask to see your council approved building plans and fixed price building contract before they can unconditionally approve your loan.
Construction loans are usually set up to be interest-only, at a rate that is usually only slightly higher than that charged on normal residential loans.
If you'd like help with assessing your personal and financial situation, as well as comparing the loans in the market to see if you're truly getting the right deal for you, then call Bob Malpass now on 0431 862 136, email [email protected] or send us a message via our website for a quick response.
Thanks for reading,