Adam Empringham,
Director of Sales at Image Property.
How to upgrade to a larger home in today’s property market
Planning to upgrade to a larger home in today’s competitive property market requires careful consideration.
With interest rates expected to rise, it’s understandable to feel apprehensive.
However, there are steps you can take to navigate the financial aspects of moving to a bigger place.
Renovate your current home
Before jumping into buying a larger house, it’s worthwhile to do your homework on the costs of renovating.
However, Karen Dimsey, a home lending specialist at Bendigo Bank, suggests that many homeowners overlook this option and end up increasing their mortgage without fully understanding the financial implications.
Instead, Dimsey advises clients to consider renovations or extensions, especially if they love their current location.
She also added that investing in improving your existing home through renovations or extensions might be more cost-effective, as it can save you from paying expensive real estate commissions and stamp duty costs.
Weigh up the costs of moving
Remember that transaction fees, exit fees, or fixed-rate break costs can add up.
Dimsey refers to these as “changeover costs” and explains that they can be as much as a new kitchen or bathroom, with nothing to show for the expense.
So, it’s crucial to factor in these costs when deciding.
Another option is exploring cheaper suburbs in the surrounding area, often favoured by young families who wish to stay close to schools and communities.
Study refinancing
With the Reserve Bank of Australia raising interest rates 10 times in the past 11 months and more, as predicted by economists, borrowers need to be proactive in managing their budgets and borrowing capacity.
Sydney mortgage broker, Karina Fox of Diagnostics and Finance, advises borrowers to create a buffer in their budgets to account for future interest rate rises, in addition to any buffers automatically factored in by banks.
Fox emphasises the need to stay informed about the impact of potential delays in selling a property on borrowing capacity, as interest rates can change frequently and impact affordability.
She advises borrowers to keep their finger on the market’s pulse and seek professional advice to understand their borrowing capacity accurately.
Get the Right Advice
When considering financial products such as refinancing, seeking advice from mortgage brokers and lenders is crucial.
Dimsey prefers face-to-face or online meetings with customers to discuss their needs and goals in detail.
This includes assessing borrowing capacity, estimated property selling prices, commission costs, stamp duty costs, and existing loan repayments.
Whether borrowers choose to upsize by renovating or selling and buying a new property, seeking professional advice can provide a clear understanding of available options and how they align with their needs.
