OT: Q about moving house and finances

[owen]

Hi Everyone. Yet another OT topic from me, sorry but you guys are a wealth of information

We are looking at moving house, specifically buying a house and land package and building but I don't know what happens on the financial side of things. Would I have to sell my house and move somewhere temporarily whilst building? Or would I be able to stay here until the house is built and then sell?

Sorry if these are simple questions, I just have never been in this situation before.

Cheers,
Owen.

[Geoff]

Hi Everyone. Yet another OT topic from me, sorry but you guys are a wealth of information

We are looking at moving house, specifically buying a house and land package and building but I don't know what happens on the financial side of things. Would I have to sell my house and move somewhere temporarily whilst building? Or would I be able to stay here until the house is built and then sell?

Sorry if these are simple questions, I just have never been in this situation before.

Cheers,
Owen.

Where's Glen? He will be your friend.

[Glen]

Owen, I recommend Goanna Oil for the lump in your hand


Very, very general, but if you add up the cost of the new house and your existing loan, then divide by the value of the new house and old house combined, if the result is less than 80% then you stand a good chance of someone loaning the money to build while staying in the existing house.

eg old house worth $200k owe $50k new house $300k - the calculation is - ($50k + $300k) = $350k divide by ($200k +$300k) = $500k = 70%


There are other things involved other than this and many mitigating circumstances which may over ride this calculation but it will give you an idea. PM with any questions you have, more than happy to give advice to a fellow member

[owen]

Thanks Glen, you're a jack of all trades

I appreciate your advice, I had a play with your formula and firstly came out at 345% and was pretty bummed out hehehe but then I pushed the right buttons and it came out at 72.5% - closer to 80% if we get $50k less for our house. I'm guessing my first step would be to go and have a chat to credit union.

Thanks Glen, I'll probably get back to you a bit later

Regards,
owen.

[Glen]

Sounds like you will be ok Owen, if it comes out at 72.5% or even 80% at the lower price most lenders will be happy.

Remember to allow for stamp duty on the purchase and mortgage, rates here just click on calculators and go to sale of land or business. You will notice Mr Iemma likes to grab more than his fair share, $40k on a $1m purchase, $18k on a $500k purchase, another $2k on a $500k loan. I think the rates are $100 flat in NZ, go figure why Mr Carr invests there instead of his home state

Also allow 2-3% for sales agents, I am aware agents charge a bit more outside Sydney due to lower dollar amounts.

Good luck

ps Make sure you will feel comfortable with repaying the end mortgage, the amount after your existing property is sold and all expenses paid (remember one prominent member here has a saying - mortgage kills- more true with Sydney property prices). Just for your interest here is the origin of the word mortgage:

In the word mortgage, the mort- is from the Latin word for death and -gage is from the sense of that word meaning a pledge to forfeit something of value if a debt is not repaid. So mortgage is literally a dead pledge. It was dead for two reasons, the property was forfeit or "dead" to the borrower if the loan were not repaid and the pledge itself was dead if the loan was repaid. In the words of the 17th century English jurist (and apparently etymologist) Edward Coke:

It seemeth that the cause why it is called mortgage is, for that it is doubtful whether the Feoffor will pay at the day limited such summe or not, & if he doth not pay, then the Land which is put in pledge vpon condition for the payment of the money, is taken from him for euer, and so dead to him vpon condition, &c. And if he doth pay the money, then the pledge is dead as to the Tenant, &c.

The word is 14th century in origin

[Glen]

 PS Owen, the sort of loan you want is called a bridging loan, in the old days they used to be a highway robbery rates, now usually done at standard variable, then when the old house is sold you change to a lower rate for the final amount

[owen]

Thanks again Glen. From my very basic estimates we will get out of it almost even, in computer terms it's pretty much a free upgrade

For a house and land package it is around $270,000 then another 20-25k for extras, and we're hoping to sell our house for around the same amount so give or take a little bit. My original loan amount was based on just my own income, now that I've sent my wife out to earn a living hopefully we won't have any trouble if we need to borrow that little bit more. Even still, the loan repayments should be very close to what they are now. (This is based on my estimates which could very well be missing something that is blaringly obvious).

Again thanks.

Regards,
Owen.

[big pix]

..... well what can I say....... you don't own a ....... oops not a correct thing to well .,,,,,,,,say

[big pix]

realy, when you have done your numbers on all the finance, in the end you can only win as you have something to sell, one must off set the other..........

[Glen]

Sounds like it will work out well Owen, you are probably right about $20-$25k for in/ outs costs, allow a little bit to fit the house out as some of the project homes come with quite a basic package, make sure you get yourself a spa bath. plasma tv and D2X, you wont even notice $10k on the loan, you will probably save that with the more competitive rates these days

[ABG]

Sounds like it will work out well Owen, you are probably right about $20-$25k for in/ outs costs, allow a little bit to fit the house out as some of the project homes come with quite a basic package, make sure you get yourself a spa bath. plasma tv and D2X, you wont even notice $10k on the loan, you will probably save that with the more competitive rates these days

I can see a flood of DSLR users homes going on the market...

[Mj]

Yep... make absolutely sure your adding a little extra on your estimates... at the end of the day if you don't spend it your ahead, but it's sad when you need to spend and haven't allowed the extra.

Still going through a reno here... over budget by 50% which is typical.

Remember that the financial companies are happy to loan when they have security against the contract. Low risk for them... but doesn't mean that you can live with the loan... buyer beware !!!

Ask lotsa questions and don't jump in till you really feel comfortable with the likely outcomes. Act in haste... repent in leisure !!!