New Home, New Beginning: Guide to Your Next Home

Moving into your new home is more than just changing your address, it’s the beginning of an exciting new chapter in your life. With so much to organise, from finances to logistics, the process can quickly become overwhelming.

We’re here to guide you through each step to help make buying your next home less stressful!

Importance of Pre-Approval

Before looking to purchase your new home, it is good to secure a pre approval home loan first. Pre-approval is where a lender looks over your financial situation and determines how much they will lend you. This gives you peace of mind knowing your budget while looking for a new home.

Having your pre-approval beforehand also shows you are a serious buyer to the seller and adding strength to your offer. Our Head of Home Loans, Bill Robb shared a scenario on the importance of securing pre-approval beforehand and how our team was able to guide our customer through the process:

Our customer had been searching for their next home and kept hitting the same roadblock with realtors asking if they had finance arranged, without a pre-approval in hand their offer wasn’t being taken seriously even with a considerable deposit.  Our customer applied and within the same day our team was able to get them pre-approved before the weekend. Armed with the pre-approval they were able to head into the weekend and ended up finding their next home and having the offer accepted before the weekend ended.

This experience occurs more often than you think. Homebuyers don’t realise just how crucial your pre approval home loan is in today’s fast-moving market. Having your financing pre-approved demonstrates you have the funds and gives you a significant advantage over competitors who haven’t secured their financing yet.

Deposit for next property

A deposit is a percentage of your home’s purchase price and shows proof of your commitment to getting your next home. Having a deposit helps as it demonstrates your ability to save and manage your finances.

Generally, with a home deposit you would need at least a 20% deposit. An example of this is you’re purchasing a home for $600,000; a 20% deposit would be $120,000. Meeting this would not only strength your loan application but also give you access to more favourable interest rates and loan terms.

If your deposit is less than 20% lenders may require you to pay for Lenders Mortgage Insurance (LMI). LMI is an insurance policy that protects the lenders in case you default on your loan. The cost of LMI can vary depending on the size of your deposit and the total loan amount, and it can either be paid upfront or added to your loan balance.

It is worth noting that even if you didn’t pay for LMI when you bought your first home, you may still be required to pay it when buying your next property if your deposit is less than 20%. This applies regardless of your previous loan history and can impact your loan balance.

Bridging Loans:

A common challenge when purchasing a second home is aligning the sale of your current home with the settlement of your new one. Most homeowners often find themselves needing to secure their new property before their existing home sells, which can add stress.

Bridging loans help address the challenges by providing temporary financing during the transition period. The loans like in their name effectively “bridge” the financial gap, allowing you to proceed with your new purchase while your existing property remains on the market. The structure of bridging finance differs from our standard mortgage in a couple different ways, such as:

1. Interest rates are generally higher as they reflect short-term finance and increased lender risk.
2. Loan terms are normally offered between one to twelve months and has the potential to go to twenty-four months but will depend on the lender.

There are also two bridging loan structures you can look at, which are:

• Closed Bridging: Has confirmed sale date for your existing property, providing certainty for both you and the lender.
• Open Bridging: Applies when your property is on the market but hasn’t sold, which offers flexibility but typically comes with higher interest rates.

Something to keep in mind when getting a bridging loan is the interest can accumulate quickly if your existing property takes longer than expected to sell. Most lenders will require a clear exit strategy which will detail how you’ll repay the loan, typically through the sale of your existing property or refinancing to a standard mortgage once both properties have settled.

For a deeper dive into how bridging loans work, check out our previous blog, ‘The Pros and Cons of Bridging Finance for Home Loans’.

Moving to Your New Home:

Finalising the purchase of your new home is an exciting milestone. With all your focus on buying and selling, it’s easy to overlook the move into your new home. Creating a moving home checklist can help you stay organised and ensure a smooth transition into your next home.

If you’re looking for some general home buying tips, Moneysmart has a helpful article where they provide six steps to buying a house.

Purchase Your Next Home with Ease:

Enquire now to get the process started on buying your next home!

Shopping for a home loan? Our “Smart Guide to Comparing Your Home Loan” helps you understand your financing options, key factors to evaluate, and the pros and cons of different interest rates.