Here’s what to know first.

If you’ve already got one foot on the property ladder, congratulations - purchasing a home can be a great investment. For many people, there comes a time when they want to buy another property. This can be due to a range of reasons – whether it’s wanting to move to a larger property, a smaller one, a need to relocate, or wishing to buy an investment property.

Because you’ve previously purchased property, it can be easy to assume that you just need to repeat what you did before. However, there can be a few differences in the process for second-time buyers, so here are six things to look out for:

1. Markets and prices

House prices can change – sometimes quite quickly. So be sure you’re aware of the current market conditions and not relying on older information. Take a look online at recent sales results, and also be aware that the demand for property in particular areas can vary. What might have been previously thought of as an unattractive area may now be very much in vogue, and vice versa. This can be due to things like changes in infrastructure, surrounding development, or societal trends. For example, the COVID-19 pandemic has seen a rise in people working from home and challenges the need to reside close to the office.

2. Changes to legislation and stamp duty

The laws and rules regarding stamp duty and borrowing limits can change over time, so again, make sure your information is up to date. Also consider that some of the grants, concessions or exemptions you may have been eligible for when buying your first property may not be available to you now.

Plus, if you’re looking to purchase in another state, the rules can vary so make sure you do your homework.

For a guide on the amount you might pay in stamp duty, you can use AMP’s calculator. 

3. Consider your equity

The equity in your home can be thought about as the value you hold within it. By unlocking it, home equity can be a useful tool when purchasing a second property. That said, there are a few things you need to look out for.

4. Refinancing

Depending on what your financial position is, and what you’re looking to buy, you might need to consider refinancing. Market conditions, interest rates, and offers from lenders can change regularly so take a look at what’s currently available. A good port of call might be to seek the services of a mortgage broker who can let you know what’s available in the market. Learn more about refinancing. 

5. Sell then buy, or vice versa?

It’s unlikely you’ll be able to simultaneously buy one property while selling another, so do you buy your new property before selling the old one or vice versa? Whichever order you choose, there are a few things to think about.

If the market is falling, it may be preferable to sell first and then buy. The reason for this is if the market falls after you buy, you’ll effectively have more buying power when you purchase your new place, as its price may have fallen too – provided the new property is in the same or a comparable market as the property you sold.

However, on the other hand, if prices rise after you sell and it takes you too long to find a new property, you might lose some of your buying power, as the market rate for your new home rises.

If you do wish to purchase a new home before selling your old one, sometimes a bridging loan can help you manage the process, however the extra level of debt and interest may be a burden.

Alternatively, you might consider asking for longer settlement period for your new home purchase. This could allow you more time to sell your old home so you can access those funds to pay for the new one.

6. Capital gains tax

Capital gains tax is the tax you pay on profits from selling an asset, such as a property. It’s important to note that your primary residence (i.e. the property you’re living in) is generally exempt from capital gains tax. However, if the
property you’ve sold was an investment property, capital gains tax applies. It’s best to speak to your adviser or accountant about your particular situation.

If you’re selling a property and capital gains tax does apply, the good news is that there are a few things you can do to help minimise the amount of tax you pay. Learn more

Buying a property can be an exciting time, with lots to consider and think about. Hopefully, we’ve helped make it a little easier. Good luck.

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Any advice and information is provided by AWM Services Pty Ltd ABN 15 139 353 496, AFSL No. 366121 (AWM Services) and is general in nature. It hasn’t taken your financial or personal circumstances into account.

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