I'm buying another house, what are my mortgage options?
September 01, 2018 at 4:02 PM
AUCKLAND, New Zealand: Most banks will consider allowing you to transfer your existing mortgage to your new property but you should definitely confirm this before entering any sales agreements.
When it comes to changing homes you typically have three options:
- Sell your existing property first.
- Buy before you sell.
- Keep the existing property as an investment.
Selling your property first is the most straightforward option but you may have rent while you search for a new home. This eats into your savings and creates extra hassle with having to move house twice, finding extra short-term storage etc. However, there are some benefits, including:
- You know exactly how much you have to spend
- You’ll have a good deposit to put down, at the very least.
If you buy before you sell, you have two options: a conditional sales agreement or bridging finance. A conditional sales agreement usually gives you 6 to 8 weeks to sell your house—and go ‘unconditional’.
These contracts normally include a ‘cash out’ clause, which allows the seller to cancel the agreement and accept a cash buyer’s offer. You may have to pay a deposit when signing a conditional sales agreement, which is refunded if the sale doesn’t go through. These contracts shouldn’t be taken lightly—you may lose this deposit if the seller can prove you were not genuine in your efforts to sell your property.
The third option to consider is keeping your existing property as an investment. You’ll need to weigh up whether the likely rental income will cover the mortgage and maintenance costs, or whether you can cover the shortfall.
The New Zealand Government is proposing changes to IRD rules, to reduce the ability to offset investment property losses against personal income—so we recommend that consider how such an outcome may affect you.
For professional advice on loan ‘portability’ and the best approach to buying, selling or holding property—talk to the mortgage experts at LoanPlan, mortgage advisers.