The answer is: “Yes, you can.” This is probably expected, due to the fact that roughly one-third of Australians presently reside in a mortgaged house.
People sell their home before paying off their mortgage for various reasons: for downsizing, moving to a new area; or needing a bigger space for a growing family, or just wanting a larger kitchen.
What are the important things you need to know?
Determine how much your existing home is worth
Do the numbers before putting your home on the market. The first step is to calculate the value of your current home because you absolutely don’t want to sell for less than you owe, or less than you required to fund your new home.
You also have to check the gap between the cost of your new home and the return on the home you are offloading. If you have to take out a loan for the new property, you will need to evaluate your new loan costs, because you don’t want to face difficulties in making your loan repayments after you sell.
Determine your costs
Several costs are associated with selling and buying properties, which could seriously affect the money you have to play with. Begin by looking at your mortgage papers. If are paying a fixed-rate mortgage, there may be fines for paying out early.
You also need to consider the agent’s commission, marketing and advertising fees, and any banking and government expenses, like stamp duty, registration fees, and title transfer costs. These will cut into the money you get at settlement.
While it may take some effort on your part, it is important to know the costs involved before you move forward.
What else do you need to check?
Whether you sell your home and buy a new home simultaneously, or whether you sell now and buy later, will influence a lot of things.
If you sell first, then buy later, you’ll know exactly how much money you’re working with. But you’ll also have to find a temporary home, which you will have to rent. However, you could probably continue living in your old home by renting it back in the interim from the new owner.
Though, if you purchase first, you have to be prepared to pay two mortgages at the same time.
What is the process?
When you have signed the contract of sale for your existing home, you’ll have to get in touch with the bank or financial institution that owns your mortgage. They will prepare the “discharge of mortgage” documents, which they file at the same time the ownership of your property is transferred to the new owner. This has accompanying fees, so you have to know beforehand what fees you’re required to pay,
After releasing your mortgage, your lender will deduct the amount of money needed to pay out the mortgage and hand over the balance to you.
It is crucial to keep a calm head in the flurry of finding a new home. Selling a house get can emotional and you can sometimes can get caught up in the negotiation process and end up selling for a price that is lower than you aimed for. Note, that for each dollar you subtract from the sale price is a dollar that you can’t spend.
Prior to starting, set a price range that you can be happy with. This will significantly help with a possible counter-off on your initial price.
My final advice is to ask help from an expert. Each mortgage is different, so it is crucial to fully know what you’re signing up for, instead of pretending it is business as usual.
By working with a mortgage broker, you can make sure you don’t overlook some important terms. And an adviser will be doing most of the legwork, allowing you to just be excited about moving to a new home.