When clients came to talk to us recently about organising finance for the purchase of their next family home, it was time to action the “slow and steady wins the race” approach.
Leah and Brett bought their first home in a sleepy lakeside suburb of Lake Macquarie, with the plan of giving it a bit of a facelift while they lived in the granny flat out the back.
“We built the granny flat so we could live there while we gave the house a cosmetic makeover,” says Leah. ‘But once we started to pull things out we realised it was more of a project than we realised – and my husband is a builder!’
So what began as a freshen-up quickly escalated into a complete renovation, with the home stripped back to its foundations before any new work could begin. What was to be a three-month job for Brett blew out by six months and as for costs…
But nine years down the track it’s (almost) a fond memory for the couple. “We lived in the granny flat for three years,’ Leah explains. “It was great!”
With two small children and a yearning for some more space, the family is moving on and has put their home on the market. And, despite already finding their next dream project, after chatting with us they have chosen to sit tight and wait until they sell their home before making an offer on the next.
“It’s hard to wait,” Leah says. “We’ve found a place that’s perfect for us. But once we sell this place, we’ll know where we stand, we’ll have our finance in place and we can make an offer from a position of strength. I just hope it all works out!”
Even though Brett and Leah are probably in a position in which they could organise a bridging loan, after working through their options, they decided to take our advice and wait it out and try to sell their own home first before doing anything else.
This way, they will know just how much money they have to offer and it also means they won’t be tempted to take a lower price on their own home just to relieve the financial pressure of a bridging loan. The worst case scenario will be having to find somewhere to live if they miss out on the home they want to buy.
While there is a good cased for bridging finance for a lot of people, it just wasn’t the approach the couple wanted to take. Bridging finance is no longer as expensive as it used to be and if you have the means to service the loan, most lenders should negotiate with you on a rate that is usually pretty well in line with the current home loan offering.
However, it can be expensive to set up and you will have to service two home loans until you sell your existing home; which may put you under financial pressure and tempt you to sell your home for less than it is actually worth just to ease the stress.
— Paul is the Director of CVG Finance, a leading brokerage offering financial services across all areas.