• The next step towards buying your second property


    Author: Bankwest (sponsored content)

    Maybe you want to take the next step to becoming a real estate mogul. Or perhaps you just want to sell where you are now and buy somewhere bigger.

    Either way, when your circumstances allow it, it’s totally doable. Just make sure you do your research and make well-informed decisions.

    The extra dollars in the detail

    Whether it’s a holiday house or rental, you’ll likely need a home loan if you’re buying a second property. While your lender treats a second property in just the same way as a first property as far as mortgages go, the good thing is you may not need another deposit because you could use the equity in your existing home instead. This of course depends on the value of the second home and the amount of equity you hold in the first.

    If you’re selling your home to buy another one, you can use the proceeds from the sale as the deposit. Keep in mind that if the cost of the new home is large, the deposit required may be more than the equity you release in the sale of your home. In this case, you’ll need to add some cash as a deposit.

    Buying a rental

    This can be a smart financial decision. If property prices rise, you might make a capital return on the investment and some income from rent.

    That said, it’s important to make rational decisions. You might fall in love with a property - and it might love you back - but that doesn’t mean it’s going to make you money.

    It’s worth thinking about where you want to buy your rental property, as the location will likely differ to where you’d buy your own home to live in. To help decide if a property is right for you, you can use property reports to assess local markets and house values.

    We’re gonna need a bigger house

    If you’ve decided you want to upsize, it’s important to consider the ongoing cost of maintaining a larger property.

    Calculate how much you currently spend on your mortgage, insurances, maintenance, rates, commuting and other expenses. Add up the expenses for all your property options to help make sure you buy the right house for your financial situation.

    Selling and buying - simultaneous settlement

    Same day, simultaneous settlement is the ideal situation. It means that the sale of your current home and the purchase of your new home happen on the same day and the funds simply move from one loan to the other. It can be tricky to organise, but it means you won’t have to pay two mortgages at once, or rent a place in between selling and buying.

    Talking to your lender and settlement agent to see if simultaneous settlement is possible will be your first step.

    If simultaneous settlement simply isn’t achievable, your lender can help you look at other options, such as bridging finance. This is a short-term loan to cover you during the gap between selling your house and buying your new one.

    Things to keep in mind

    There are always costs involved when buying and selling properties. You’ll need to allow for the additional costs of stamp duty, settlement and other fees.

    Other costs might include transfer of land, government registration and search fees, plus bank fees.

    Take a look at our guide to upfront home buying costs.

    Speaking to the right people and getting the right information from the beginning can make the process a lot smoother and give you a head start on making a more informed decision.