When you first moved into your two bedroom, one bathroom unit, it was as sweet and cosy as could be. 10 years and two kids later, the word 'cosy' can quickly be substituted for 'cramped'. The once snug kitchen now feels like a shoe box; elbows are pinned to your sides as you juggle the pots and pans that hold dinner for 4, while toddlers dart around a mini-obstacle course made up of the dishwasher, rubbish bin, and high chair. Your littlest still sleeps in a cot beside your bed (she is 3), and your eldest's room only just fits his small single bed, with a few toys squashed in the corner.
If this completely hypothetical scenario resonates with you, then it's time to bite the bullet.
An upsize is in order.
What's my first step?
Once you've decided you need a change, it can be hard to know where to start. Do you put your house on the market? Do you go to a bunch of auctions? Do you agree to 12 months of intense saving so you can afford your dream house?
Every situation is different, and every method has its benefits and detriments. Let's take a closer look.
Sell first, then buy.
This is the most logical method when moving. By selling first, you know exactly how much you have to spend, and will protect yourself from landing in any financial hardship. Overestimating your property's sale price, or incorrectly guessing how quickly it will be swept off the market, will no longer have dire results as you haven't committed to any future debts. BUT - and this is a big but - you run the risk of not finding a new property in time. Settlement periods usually vary from 30-120 days, and if the market is cold, this isn't a very long time to buy a new home - particularly when factoring in your new home's settlement period. Being homeless doesn't sound too appealing, right? Of course, you could always rent while you look, but it wouldn't be much fun packing and unpacking your whole life only to do it all again in a few months time. Another potential 'snag' is by the time it takes to sell, house prices may have risen. This means all that equity you'd plan to use to get you into a nice new 4 bedroom, has now been consumed by the property market spike. Thus, this method comes with both its upsides and downsides.
Buy first, then sell.
On the other hand, by buying first and selling later you can ride the property market wave until a peak allows you to sell for a pretty penny. For those financially able, this method presents many benefits. You would not have to rent in the meantime, and - if the housing market continues its upward trend - you have the potential to earn capital growth on both properties at once. Again, this method is not without risk. What happens if you are unable to sell your home? Or, what if the market crashes and you are forced to sell for less than you bargained for? You've just accumulated the largest debt of your life - and when things start to go bad, they can go worse. Be sure you have a safety net to prepare for such occurrences, and seek expert financial advice in advance.
Keep saving, and buy in 12 months.
While this conservative method can prove fruitful, it can also be hard to gain any ground. As your savings account rises, property prices can too - so in 12 months, you might find yourself exactly where you started.
If you do choose to stick to a savings regime, this is where your existing redraw facility can come in handy. Pay all extra funds directly into your home loan so you can save on interest repayments, chew down your mortgage, and build up equity.
If you are planning on upsizing, downsizing, or are simply after a change in scenery, don't do it alone. Seek the help of a financial expert (a mortgage broker perhaps?!) to ensure your big move is conducted in the most economical, beneficial and convenient way possible.
Disclaimer: The advice provided in this article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. We encourage you to consult a finance professional before acting on any advice provided in this article or on this website.