Climbing the Property Ladder: A Guide on Upgrading to Your Next Home.

As a seasoned Mortgage Adviser, I've helped numerous Kiwis navigate the exciting yet complex journey of upgrading to a new home. If you're a homeowner looking to make that next step up the property ladder, here's what you need to know about financing your upgrade. Read on or give me a call to find out more.

Understanding Your Current Position

Before diving into the upgrade process, it's important to assess your current financial situation. This is where working with a Mortgage Adviser can really help. We will start by determining how much equity you've built in your current home, as this will be a significant factor in your buying power. We will also review your existing mortgage terms, paying special attention to any break fees or conditions that could affect your move.

Bridging Finance: A Useful Tool for Upgraders

Bridging loans can be a game-changer when upgrading your home. These short-term loans 'bridge' the gap between buying your new home and selling your current one. This financial tool allows you to make more favourable offers and potentially secure a better price on your new home. However, it's important to consider that bridging loans typically come with higher interest rates and require a solid exit strategy so make sure you talk to a Mortgage Adviser first.

Leveraging Equity for Your Upgrade

Your home equity is a powerful asset when upgrading. To calculate your equity, subtract your outstanding mortgage from your current home's value. This equity can serve as a deposit for your new home or help secure better loan terms. This is also the point where it’s wise to consider whether refinancing your current mortgage could free up additional funds for the upgrade.

Navigating the New Lending Environment

The lending landscape may have changed since your last purchase. Lenders are now focusing more on debt-to-income ratios, assessing your total debt relative to your income. The Responsible Lending Code has introduced stricter criteria, meaning more thorough assessments of your financial situation and with interest rates fluctuating, it's important to consider the long-term affordability of your new mortgage. Just remember, not all banks are created equal when it comes to mortgages, so it’s a good idea to use the services of a Mortgage Adviser to gain access to all lenders and mortgage products.

Structuring Your New Mortgage

When structuring your new home loan, there are some really good ideas that could benefit you and your financial goals. Make sure to consider options like split loans, offset mortgages and revolving credit facilities in your decision making. A Mortgage Adviser can give you guidance on the pro’s and con’s specific to your situation.

Consider these options for your new home loan:

1. Split Loans: Divide your mortgage between fixed and floating rates to balance certainty and flexibility.
2. Offset Mortgages: Link your savings accounts to your mortgage to reduce interest payments.
3. Revolving Credit: Offers flexibility but requires strong financial discipline.

Managing Two Properties

If you're buying before selling, there are several factors to consider. Think about the potential rental income from your current property if you plan to keep it temporarily. Understand how owning two properties might affect your tax situation, and ensure both properties are adequately insured during the transition period.

Costs to Consider When Upgrading

When budgeting for your upgrade, remember to account for additional expenses. These include but are not limited to:

• Real estate agent fees for selling your current home
• Legal fees for both selling and buying
• Potential break fees on your current mortgage
• Moving costs ((including rent or storage fees if you don't find another property to buy in time)
• Any immediate renovations or updates to your new home

The Strategic Advantage of Pre-approval

Securing pre-approval is even more critical when upgrading. It gives you a clear budget for your new home, strengthens your position in negotiations, and allows for quicker action in a competitive market so make sure you get this underway with a Mortgage Adviser early on in the process.

Ready to Take the Next Step?

Upgrading your home is an exciting milestone, but it often comes with its own unique set of financial challenges and opportunities. If you're feeling overwhelmed by the options or want to ensure you're making the most strategic decisions for your upgrade, let's talk.

As an experienced Mortgage Adviser specialising in home upgrades, I’m here to guide you through every step of the process. From assessing your current position to securing the ideal financing for your new dream home, I’ve got you covered.

If you need a hand navigating the complexities of break fees, feel free to reach out so we can help to find the best solution for your situation.

Cheers,

Dallas

??027 218 8795 [email protected] ??loanmarket.co.nz/agile