Great Article from Adelaide Bank!

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 of 4 living in Thomastown, Victoria. 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 they need to rent?
  • Will they settle for less just to own their 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 a borrower doesn’t qualify for bridging with one lender, doesn’t mean all lenders will respond the same way.

The difference lies in how lenders interpret serviceability. Some base serviceability on peak debt ($849,441 in the Carter’s case) which can make it pretty difficult to qualify for bridging. Other lenders, like Adelaide Bank, base serviceability on end debt ($421,941 in the Carter’s case) making bridging a much more realistic option.

Adelaide Bank bridging loans also require no repayments for 6 months as interest can be capitalised for that period. What’s more, borrowers who want to make payments can, thanks to a 100% offset facility.

So bridging really can be a great option, it just depends on finding the right lender. If you are tossing up between bridging and sell-rent-buy, we can help you make an informed decision!

Call us for more information.