July 03, 2017
Some homeowners buy before they sell. Others sell then rent until the right home comes up. Ever wondered what the best option would be cost-wise?
We've put together an example to compare the expenses involved.
The Carters are a family living in Adelaide, South Australia. They want to upgrade to a bigger home in the same suburb. The Carter's existing home is worth $450 000 and they have $200 000 mortgage against it. Their new home is $650 000 and they'll pay a $50 000 deposit to secure it.
Here's a comparison of the costs the Carters would be up for:
- If they took the bridging option and bought their new home straight away.
- If they sold, moved into a rental and bought later.
While the table may show a cost advantage to the sell-rent-buy route, there are other factors homeowners should consider, including:
- How long will you need to rent?
- Will you settle for less just to own your own home again?
- Is the stress of moving twice really worth it?
- For those who don't qualify for a bridging loan, renting or staying with friends or family until the right home pops up may be the only choice. That being said, it's important to understand that just because you don't qualify for bridging with one lender, doesn't mean all lenders will respond the same way.
The difference lies in how lenders interpret your ability (serviceability) to repay the full debt ( referred to as peak debt).
Some lenders will base serviceability on peak debt ($849,441 in the Carter's case) which can make it pretty difficult to qualify for bridging.
Other lenders, base serviceability on end debt ($421,941 in the Carter's case) making bridging a much more realistic option.
Mortgage Choice understands this difference when considering bridging loans. So bridging really can be a great option, it just depends on finding the right lender and that's our job to find one for you.
If you are tossing up between bridging and sell-rent-buy, met with us to determine the best option for you.