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If you are thinking about upsizing your home, there are a number of finanicial questions you need to ask yourself before going ahead.

Many home owners decide to upsize due to marriage or a growing family, but do you know how much it's really going to cost you? Listed below are the top financial questions you need to ask.

What information do I need when applying for a home loan?

If you already own a property and are looking to upsize, the home loan process is very similar to when you first applied. As this is your second property, you may have either the proceeds of the sale of your last property, equity in another property or savings. If you are in a good equity position, it may mean that you will be able to borrow 80% or less of the purchase price, meaning you will avoid paying extra on lenders mortgage insurance.

However, when applying a home a loan, remember you need to show a combination of both equity and income to be able to meet repayments.

When you start shopping for a home loan, you will need to have the following details available for your lender.

•  Selling price of your existing home

•  Selling costs such as agent’s commission costs and legal fees            

•  Loan payout figure for your existing home loan, which will be the amount owing plus any discharge fees           

•  Annual income you earn           

•  Rental income from investment properties            

•  Regular financial commitments and living costs. Don't forget child maintenance, private school fees, childcare costs, contractual obligations to make regular payments like pay TV

•  Credit limits for all credit cards and interest free accounts            

•  Other loans. You will need to know the amounts owing and the regular repayment amount                       

•  Know the value of any other property or investments particularly if these are to be sold to help fund the purchase            

•  Savings balance that will go towards the purchase

How much can I borrow?

In order to slow down investor lending, the Australian Prudential Regulation Authority (APRA) implemented stricter lending guidelines. As a result, a lot of lenders have tightened criteria which has resulted in reducing the amount they are willing to lend. As a result, borrowers may find that they no longer qualify for loan amounts that they previously did.

It is important to have an understanding about how much you can borrow before you start house hunting. But how will you know whether you will be affected by these changes or not? Extra research. Chat to different lenders and get them to do the calculations for you. Knowing this before you apply for a pre approval can save time and an extra enquiries on your credit report.

To get an idea about how much you can borrow try our online loan qualifier here. It can give you an answer in minutes and is easy to complete, no matter where you are. To get an idea of what the loan repayments will be on different loan amounts click here.

What other costs are involved?

The purchase price is not the only expense you will need to budget for. There are a number of other costs involved with upsizing that could definitely upset your finances if you are not aware of them. Some include:                   

•  Stamp duty & Government charges: This is one of the biggest costs and usually paid on settlement or beforehand. You can work out what the stamp duty will be for your state by using our calculator. This calculator will also give you other charges including mortgage registration and transfer fees.           

•  Solicitor or conveyancer fees: Get a quote to know what to expect. Some charge a flat fee while others have a set amount plus any costs they incur. Make sure you understand which one you are committing to and approximately how much it will cost.  

•  Building and pest inspections: You solicitor or conveyancer will advise on which reports they recommend you getting prior to committing to the purchase. Building and pest inspections can help give buyers peace of mind that they are not buying a property with any issues they are not aware of.

•  Loan establishment costs: For some loans you will be charged an establishment fee, a valuation fee and/or the legal costs of putting the loan in place for you. Get a clear idea of which apply when you are comparing loans and preparing your budget.

•  Lenders Mortgage Insurance (LMI): If you are borrowing more than 80% of the value of the property, mortgage insurance will be added to your loan. Even though you may not pay it directly, it is worth getting quotes and comparing the cost charged by different lenders. For more information about LMI click here.

•  Moving costs: Removalists, utility transfer, temporary accommodation, new furniture - these are all possible expenses that you may be faced with when moving to a bigger home.                              

What happens if I want to buy before I sell?

Ideally you would sell your existing property prior to purchasing. But things don’t always work out the ideal way. A slowing market, price fluctuations and just general market unpredictability often results in homeowners finding their new home before selling their existing one.                     

If this happens you may need a bridging loan. You need to approach this with caution as you may incur extra costs and restrictions. Make sure you take the time beforehand to understand your options and determine if it is the best way to proceed.

At State Custodians, we understand upsizing and purchasing a new property can be stressful and aim to make the home loan process as easy as possible so that you can focus on finding your dream property. Give our friendly team a call today on 13 72 62 or leave your details here and they will contact you.