If you are fortunate enough to own your own home and looking to upgrade or even down-size then there are a number of considerations to think of. But don’t stress as we’ve got the numbers sorted below.
You’ll need to ask yourself some questions such as:
- How do I calculate the real equity I have in my home?
- How do I access this and contribute it towards my new home?
- How do I pay a deposit on my new dream home when all my money is tied up in my current equity?
These are all valid concerns so the team here at Vault Plus Mortgages will try and make things a little clearer for you. Let’s take the first question around calculating your Equity – check out this example.
| Sale of Current Home | $700,000 |
| Less Home Loan | $150,000 |
| Less Agents Fees | $14,000 Estimated at 2% of the sale price |
| Less Solicitors costs | $2,000 |
| Sub Total | $534,000 |
This represents a fairly accurate amount of the Equity you have after the sale of your current home.
Now let’s look at how we use this Equity and contribute it towards our new home. For the purposes of this example we are going to assume you are settling the sale of your current home and the purchase of your next one on the same day – which is the ‘norm’.
Let’s assume your new dream home is costing $900,000. The numbers and costs that you need to consider might be as follows.
| Purchase Price | $900,000 |
| Stamp Duty (NSW) | $35,990 |
| Solicitors costs | $2,000 Yes there are separate solicitors costs for both a ‘sale’ and ‘purchase’ |
| Sub Total | $937,990 |
This is the approx. amount of money required to complete the purchase of your new home.
Basic maths tells us we need to raise a home loan for a minimum of $403,990 ($937,990 – $534,000) for everything to run smoothly on settlement day.
So from the above example you can now see how to calculate the equity you might have in your current property. How this is injected into your new home purchase – well this is planned in advance but your solicitor will know what monies you have left over from your sale and what you need for your purchase so in conjunction with your Mortgage Broker everything will come together ‘on the day’.
That leaves one last question. How the hell do we put down a deposit on our new home if all our money is tied up in equity of our current home. The answer is a Deposit Bond and if you scan to the next Heading you’ll be an expert in no time.
Deposit Bonds
Deposit Bonds have held a very valid position in the Australian property landscape for many years now but not much is known about them and they are sometimes misunderstood. So we’ve produced the below video to show what a Deposit Bond is, how they work and the problems they look to address.