Top Tips for Second Home Buyers
Are you a homeowner thinking about buying your second home? Maybe you need a bigger place? A different location because you are changing jobs? Are you an empty nester now looking to downsize? Deciding to find a new home is an exciting time and we want to share our top tips for second home buyers to help in researching and buying a house second time around.
Buying your second house can be quite different to your first house. Not only can the market conditions be vastly different, you also have two homes involved if you are selling your first home and buying your second to move into.
8 Tips to Buying Your Second Home
If you are looking for an investment house for your second purchase, check out our guide. If you are looking to sell your first home to finance your second home, then read on here for our top 8 tips for second home buyers.
1. Figure out what you’re looking for
Buying your second home is a major life decision. So, one of the first things you need to ask yourself is why you want to move, and what is it that you are looking for in a new home?
Make a wish list of the main features you want in your new home. Is it more space? Shorter work commute? Larger, or smaller, backyard? Once you have your list of priorities, you can start some real estate search and figure out how much properties with your chosen features in your chosen area will cost.
Weighing up the cost of a new home with your wish list of features will help you determine if selling up and buying another is the right choice or if perhaps you should refinance your existing home to access equity and renovate instead.
2. Learn how much equity you can access to buy second house
If the value of your property has increased or if you have made extra mortgage repayments over the years, you may hold significant equity in your current home. You may be able to use this equity in the process of purchasing your next home, for example as security for your next loan, or to help with your deposit.
A mortgage broker can assist with a valuation to obtain an estimated market value of your current home. Your equity will be the difference between your home’s market value and the amount you still owe on your home loan. Then, to find out how much equity you will be able to use towards your next home, your mortgage broker can assist with the calculation to see how much you would be allowed to borrow. Your mortgage broker can access a range of lender information for the best options for your financial situation.
3. Find out how much you can really afford for your second home
Once you have an idea about what your new home will likely cost, and how much equity you have available in your current home, you need to understand exactly how much you can afford to borrow and repay on your new home loan.
Speaking with your mortgage broker is your first step to finding out how much you can borrow. As a rough guide, you can generally borrow an amount that would keep your repayments on your new home loan less than 30% of your after-tax income.
4. Decide if you are selling or buying first
When you know your budget, next comes the age-old upgraders’ question. Is it better to sell or buy first?
Selling your current home first is generally considered the safer option, while buying first may give you more opportunity to find your ideal next home. There are pros and cons to both options.
SELL FIRST
| Pros | Cons |
| You’ll know exactly how much money you have to spend on your new home | If you haven’t found or moved into your next home by the time settlement day arrives, you will need to rent or stay with friends or family and handle the costs and inconvenience of moving twice. |
| Saves you the stress and cost of paying two home loans at once, or paying for costly bridging finance. | If property prices are rising and there is a long gap between selling and buying your next home, you risk being priced out of your ideal location and getting less house for your money. If you’re looking for something very specific, a rising market like this could pressure you into buying something that’s not quite right. |
| Negotiating a longer settlement (90 days for example) can give you more time to look for your next property. | You know how much you have in your hands to go shopping with. |
BUY FIRST
| Pros | Cons |
| Buying first may be the only way to ensure you don’t miss out on your wishlist property. | People who buy first may overestimate the selling price of their current home and find themselves in a financially difficult position on settlement of their existing home. Including making a bad decision to sell at a much lower price as they are emotionally attached to the next purchase. |
| It can remove the hassle and costs of having to rent and instead you have somewhere to move straight into when you sell your existing house. | If you have a mortgage on your current home, you will have to juggle two loans, or take out costly bridging finance or a deposit bond, to be able to buy before you have the funds from your sale. |
| If house prices are rising quickly, you could potentially get a bargain on your next home, while letting the market upswing add to the value of your current home. | It could take longer than you have estimated to sell your home, especially if it’s a slowing or buyer’s market. This can put pressure on you to sell your current property for far less than you would otherwise have accepted. |
5. Get your finances sorted
As a second home buyer whichever option you choose – to sell first or buy first – you will need to think about getting your finances in place to buy.
Generally, getting a home loan pre-approval from a lender is a great way to get the confidence to start your property search. Pre-approval is an indication of your ability to borrow funds from a lender (based on the information you’ve provided them). It allows you to bid at auction and gives you an idea of what price range to keep your property search within.
If you’re buying first, keep in mind, you will need to think about how you’re going to pay your deposit and potentially organise bridging finance with a lender, so you can juggle two loans at once.
6. Start searching for the new (or preparing for sale)
When you have your pre-approval sorted, now the search for your new property begins. At this stage, you know what your budget is, you have your wish list for priority features, and now you can focus on finding a home that’s right for you.
You have done this process before with your first home so you know you may have to attend several open homes during your hunt. A good tip if you haven’t used it before, is to keep a checklist of the things you like and dislike for each home. Taking photos will also help you remember certain properties and why they should be shortlisted or left alone for another buyer.
At the same time, you may be getting your current home ready to sell. Preparing your house for sale should include finding a great real estate agent, improving your street appeal, decluttering and readying your home for buyers’ inspections. Preparing your home could mean hiring a professional stager, who will be able to make your home feel inviting, but not too personalised, so potential buyers can imagine their own belongings filling the space.
If you’re selling and buying at the same time, it can be quite stressful. So it’s important to do as much as you can to get your finances sorted and do your research upfront so you’re ready to go when you find your dream home.
7. Make an offer and finalise your finances
Once you have found a home you love that suits your price range and your wish list of features, it’s time to make an offer. Once you’ve agreed on a price with the seller, your mortgage broker will be able to assist in ensuring your finance is assessed by your lender and you get approval to head towards settlement.
If you are buying first and don’t have accommodation already sorted you will need to kickstart your selling plans quickly in order to minimise financial losses.
8. Get a helping hand from a mortgage specialist
Our North Brisbane Home Loans team are here to help you in buying your second house in Brisbane. No matter where you are in the process, whether you’re trying to calculate your equity or obtain pre-approval, we can take you through all your options to give you a clearer picture of your next steps.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
