With interest rates having fallen to record lows in 2020, some households have increased free cashflow and a greater borrowing capacity. As such this is likely to result in more homeowners considering an upgrade in 2021.
When upgrading there are stamp duties and other transaction costs to consider, but as a rule of thumb if you’re planning to be your new home for at least five years then this means you’re less likely to take a financial hit from moving.
Here are 4 key considerations for those thinking about upgrading this year:
1 – Making the step up: financing the upgrade
Assuming the property you want to move to is more expensive than the property you currently own, you’ll likely need to be sure that you can finance and comfortably service the difference.
Most often it makes sense to work with a mortgage broker on securing the most appropriate deal for your circumstances.
With mortgage rates having fallen to record lows most borrowers are now opting for principal and interest mortgages to pay down their debt over time, but borrowers are still split on whether to choose a fixed or variable mortgage rate.
2 – Ready to move?
Of course, if you’re going to upgrade, you will also need to sell!
Most of the usual selling tips still apply, and you may consider ways to enhance your home’s curb appeal and exterior, since simple maintenance, gardening, and landscaping are easy wins, and are proven to add perceived value to a property.
You’ll also need to be well organised with regards to having a schedule for moving. If you think it may take some time to find your new home then sometimes buyers allow for a ‘rent back’ clause to allow you to stay in your current home for a little longer.
But remember you ideally don’t want to leave your next purchase too long in a rising market!
3 – Floating all boats: upgrading in a rising market
How should your approach differ at a time when property prices are rising quickly? The thing to remember for upgraders is that although the value of your home is rising, so too is the likely value of the property you plan to upgrade to next!
Many parts of the Australian housing market are currently characterised by exceptionally low levels of stock on the market, so you need to be well organised with a pre-approved mortgage finance, with a clear idea of where and what you want to buy, and be able to act decisively when the right opportunity presents itself.
There’s no substitute for detailed market research and due diligence when it comes to buying a new home.
4 – Timing the market?
The market timing question arguably matters less for an upgrader than it does for a first homebuyer, since the properties that you’re moving between are likely to be somewhat synchronised in terms of what happens to their respective prices.
In saying that, most buyers tend to feel comfortable buying or upgrading into a buoyant market given that they’ll likely have a greater exposure to the property market overall.
With the Reserve Bank of Australia implying that the cash rate is unlikely to move higher for some time, this has pulled forward housing market demand and most consumers are looking to buy sooner rather than later.
To find out more about our affordable 10-year property plan, see here.