Central Region:

In a competitive market one of the questions we most encounter from home owners is should we buy a new house before we sell, or should we sell first?
It comes up because in a tightly competitive market homeowners are often worried they’ll miss out on a rare dream home if they wait until they’ve sold their existing property.

On the other hand, some homeowners are scared to list their home for sale without having already bought a new property in case the settlement period comes and goes and they are left essentially homeless and forced to find (and pay for) temporary accommodation.

In a market where supply and demand are reasonably balanced, selling your existing home before you buy, tends to make the most sense. It means you know exactly how much you have to spend when it comes to shopping around for your new home.

If you have your home completely sale-ready when you list, you can spend the time scheduled for your open homes visiting other properties for sale. It’s also a good idea to do some looking around before your own property is listed, so you have a clear idea of what you want.

Have your finances in order as much as possible based on the asking price of your own property so when you’ve sold or are close to selling you can move quickly on your preferred new home. Remember too, you can make your purchase conditional on the sale of your other property.

It all gets a little more complicated when the market is heated. Many home owners feel buying before they’ve sold is the only way they’re able to compete and it gives them the reassurance they won’t be shut out of the market and left without a roof over their head.

The obvious trap here is the risk of over-stretching yourself financially if you are forced to accept less than you hoped for your existing property and you have no nest-egg to tide you over. It’s worth remembering too that if you’ve already bought, you may be persuaded to take a lower price just to sell quickly.

You can also talk to the selling agent for the home you want to buy to see what time frames you can work out around settlement dates that give you the maximum reasonable amount of time to sell your existing property. Even at auctions, which typically have a 30-day settlement period, you can sometimes ask if the vendor is happy to extend.

In short, the best answer is to do as much research and preparation as possible before listing so you’re ready to move quickly if need be. And keep your sales consultant appraised of your time frames so they can help you make it all fit together.

As a homeowner, paying off your mortgage before you retire is important. Once you hit retirement age, the last thing you want is to still be saddled with debt. Here are some ways to help reduce your total mortgage and help you buy your home for less:

Shorten your term

Reducing your mortgage term to 20, 15, even 10 years shaves thousands of dollars in interest off the total. Even reducing by one year can save you.

For example, if you borrow $750,000 at 5.65% interest over 30 years, your interest on a principal and interest loan amounts to $808,537. Shorten your mortgage term to 25 years and you reduce your total interest to $651,925.

It does mean your regular repayments will increase, so be sure to check your budget thoroughly to see if it’s possible.

Make additional payments

If you’re unable to commit to shortening your mortgage period, keeping a portion of your mortgage on a floating rate or having a revolving credit mortgage, which works much like an overdraft, may be the answer.

Pay fortnightly instead of monthly

By making mortgage repayments every fortnight instead of once a month, you effectively make an extra month’s payment; so 13 repayments instead of 12, reducing the overall time it takes to pay off your mortgage.

Look out for refinancing deals

Look for refinancing offers with more flexibility or a better interest rate. Be sure to factor in any costs for refinancing when considering this option.

It’s worthwhile reviewing your mortgage on an annual basis to ensure you’re getting the best deal. Your mortgage specialist can help with a financial health check, to help you find savings.

If interest rates drop, keep repayments at your current level, rather than be tempted to spend the savings. By doing this, you’ll shave off a substantial portion of your loan principal.

mortgage-express.co.nz