If you’re considering upgrading property to buy a bigger home, that often means upgrading your mortgage too, plus there’s also a lot of hidden costs that need to be factored into your budget plans.
As a rough guide, banks will generally lend you up to 80 per cent of the value of the home so you ideally want to have the rest as a cash deposit.
Staying under the 80 per cent mark also means you avoid paying any Lenders Mortgage Insurance (LMI) – which saves you even more money.
Work out what it will cost you?
Before you get too excited, make sure you know where your money will go, once you’ve made the decision to sell and upgrade. Here’s a few of the major costs you’ll be up for.
Preparing your home for sale
If you want to get top dollar for your home, you need to ensure that it’s presentation perfect.
This doesn’t have to mean spending thousands upon thousands of dollars, but you should be prepared to outlay a little cash on repairing any known issues and giving the place a freshen up.
If you can even allocate $500-$1000 towards this part, it will be money well spent.
Remember, no one wants to buy somebody else’s headache, so make sure it presents well to appeal to the masses.
Depending on where you live, this can be anywhere from about 2 per cent – 3.5 per cent of the sale price of your home.
This may not seem like a lot of money, and that’s the way agents like it, but it can add up quickly.
Now factor in upfront costs such as marketing and advertising, which can be anywhere from $1000 for basic marketing – $10,000 + for an auction campaign, and it’s not unusual to spend over to $17,000 just to sell a $600,000 home.
This includes discharge fees, application fees, settlement fees, bank valuation fees and the preparation of mortgage documents. This can add another $1,000 to your expenses.
You will need a solicitor or conveyancer to assist you with the sale of your home, getting your contracts drawn up, title searches etc. This can set you back anywhere from $1000 – $2000 depending on who you use.
These charges vary from state to state, with Victoria having the most expensive and Queensland the cheapest.
Removalists and cleaning fees will usually total somewhere between $500 to $2,000, depending on how much stuff you have to move and how far it’s going.
It’s not often we factor in all of the ‘hidden’ costs involved when sell, and as you can see, it adds up quickly.
Based on the figures above, moving can end up a very expensive exercise. If you’re upgrading from a $600,000 home to a $750,000 home, you could be looking at over $40,000 of hard costs!!