There’s no denying that rising interest rates and our softening property market are creating plenty of headaches for all kinds of property owners right now. Surprisingly, these evolving market conditions aren’t all bad, particularly if you’re thinking about upgrading your home or moving your family to a nicer (or more upmarket) postcode.
The past few years have been challenging for anyone wanting to upgrade their home. The reasons are straightforward:
- Intense competition (ignited by internal migration and other social factors) has made plenty of hopeful upgraders feel anxious about leaping up the ladder. This occurred mostly because upgraders assumed they wouldn’t be able to buy back in quickly after selling their existing home.
- Limited stock on the market (caused by owners holding on to their properties as they rose in value, and other market forces) restricted the options available to many upgraders.
- This meant that the resulting skyrocketing prices scared possible upgraders away, simply because they didn’t have the money to bridge the gap, nor the borrowing power to make up for it.
However these three forces are starting to weaken, and conditions are starting to favour upgraders. For example:
- There’s more stock available, because (a) more sellers are placing their properties on the market and (b) buyer demand has relaxed.
- This means that the buying process isn’t such a hurried frenzy, and upgraders have more time to browse, evaluate, and negotiate.
- This also means that the financial gap between their current and desired home is smaller, making it more achievable for upgraders to realise their goals.
Common Questions You Might Have About Upgrading Your Home
We love it when our clients upgrade their home to a larger one, or they finally move to the postcode they really want to live in.
Here are the four of the most common questions we’re asked about home upgrades.
> “What will my new mortgage repayments be?”
In an environment where interest rates are on the rise, it can be harder to do a ‘back of the napkin’ calculation for a future mortgage.
Of course, online mortgage calculators are available to you, however they won’t give you the exact rate you’re eligible to borrow at. And many calculators can’t access discounted rates.
Plus, choosing between fixed and variable interest rates can be a little trickier, and you may want to future-proof your wealth creation by considering a longer-term property investment plan, too.
In this case, because you’re (probably) offloading an old mortgage, we recommend booking a quick, obligation-free chat with us. We’ll run a few numbers and give you an estimate of what your repayments and borrowing capacity may look like.
> “Do I need to get a bridging loan?”
A bridging loan is only necessary if you want to purchase your next home before you sell your existing one, and you don’t have enough cash to cover its purchase.
There are quite a few moving parts to consider with a bridging loan, and not all lenders offer them.
Once again, if you think you need a bridging loan, please book a quick, obligation-free chat with us. We’ll walk you through your options.
> “Am I upgrading to the right area, and am I buying the right property?”
There are two schools of thought when addressing this question:
- Emotional thinking, and
- Logical, data-driven thinking.
Only you and your family will know if you have an emotional connection to your next home.
However, we can help with the data-driven element of choosing a new home.
For example, you may find it useful for both your lifestyle and future wealth creation if your property is nearby:
- Shopping centres
- Public transport
- Hospitals, doctors, allied health
- Schools
- Parks and civic areas
You’ll also benefit from understanding and assessing your desired property’s expected capital growth and possible rental yield (even if you’re not thinking about renting it out anytime soon). The higher the growth and yield, the better.
- Capital growth is the expected rate at which a property will grow in value over time. Streets, suburbs, and regions will have differing rates of capital growth depending current market forces and conditions.
- Rental yield is calculated by dividing your total annual rental income by the value of your property, and multiplying the result by 100. The higher the yield, the better.
It’s also useful to research upcoming/planned developments that may increase the attractiveness of an area in future. For example, new shopping or medical centres, or upgraded public transport routes may improve your future lifestyle, and boost future interest in your property. This will help you get a better price when you eventually sell it.
> “How do I know I have the right loan?”
There are plenty of mortgage calculators and online tools that can help you assess your loan options.
However, these online services will not take your past, present, and desired future into consideration, nor will they present recommendations tailored to your unique situation.
The difference between an “OK” loan (selected from an online platform) and a carefully considered lending strategy from a specialist broker could mean the world of difference: you may be able to borrow even more funds, at a more attractive rate… which means you unlock an even better new home.
Can We Help You Upgrade Your Home, Even In A Market With Rising Interest Rates?
If you’re looking for an expert team to help with your home ownership journey, request a 30-Minute Finance Strategy Session during which you will…
- Get a better understanding of the lending options available to you, so you can upgrade your home with confidence
- Discover no-cost ways to save money on interest, fees, and charges
- Get an up-to-date picture of the lending landscape including rates, conditions, and how to structure loans
- Learn about our process to find you a better loan that could save you thousands.
This no-obligation session will be held with one of our experienced mortgage brokers.
Please be assured this will not be a thinly disguised sales presentation. On the contrary, you’ll receive our best strategic advice, specific to your situation, so you too can accumulate multiple properties without sacrificing your current lifestyle and accelerate your progress towards wealth.
Schedule Your FREE 30-Minute Finance Strategy Session Today
Please note, the numbers and assumptions listed in this article are for educational purposes only. Individuals should seek specific advice pertaining to their unique situation and the real estate market before making any decisions.
Trilogy Funding Two is a corporate credit representative (Representative Number 506131) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237)
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).