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Securing your next property before settlement

21 June 2022
Modern home living space

The selling and buying process rarely follows an exact timeline. Have you considered how you would fund the deposit on your next property purchase if you haven’t yet settled your current one? Let’s talk equity release, or bridging loans as they’re commonly called, and discover what they can do for you.

Picture this — you’ve found the perfect property. Perhaps it’s your next dream home, or a potential investment. You haven’t yet sold your current property, or it’s yet to even be listed on the market.

Perhaps the sale of your home is taking longer than expected. Even after doing everything you possibly can to get your house in top shape for sale, the market dips. Perhaps even a global pandemic hits and suddenly buyers are leaving the state in droves for sun and sand.

Regardless, unless you’re looking to expand the number of properties within your portfolio, you’ll need the equity in your current sale to move on.

Awaiting settlement can be stressful, even for the experienced. A seller’s market calls for fast decisions, so you need to face the market prepared. Imagine competing with cashed-up interstate buyers that are prepared to meet a thriving market. 

It’s often assumed that should you find your next dream purchase, you can negotiate the payment date of a deposit and in a slower market, that’s often true. You might manage to negotiate terms so that payment of deposit is conditional upon the sale of your own home. That’s assuming another buyer can’t offer the seller better, faster conditions.

Of course, not all purchase scenarios allow for flexibility, like when purchasing at auction.

Auctions require deposits to be paid on the drop of the hammer and that amount is usually 10% of the purchase price (unless negotiated prior). There is no cooling off period when buying at auction, so you need to come prepared with your finances stacked neatly in order.  

Probably the most common scenario buyers now face is needing a place to live while searching for their next home, while still awaiting settlement. 

It was once common for sellers to simply rent a property while searching for their next purchase, but thanks to the current Australian rental crisis (vacancy rates sit at 1.4% for Sydney, 1.8% for Melbourne and 0.7% for Brisbane*) this is hardly a reliable plan B.

You need financial flexibility and freedom to come out on top of the sell/buy cycle and you need an advantage over other buyers.  

You can fund the deposit of your next purchase while still awaiting settlement with what’s called an equity release loan or bridging loan. This type of loan is a cost-effective way to ensure you can remove limitations and have the money in your account usually within 24 hours.   

Applying for funds in the past was once an often complicated experience, but as property fintech continues to thrive so too do the opportunities for buyers.

Property Credit allows you to secure the purchase of your next property before you sell. You can put in your best offer or bid with confidence even while awaiting settlement — that’s an advantage every buyer wants under their belt.

*Figures true as of March 2022, sourced via Domain.com.au

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