Buying a home

You already own, or have owned, and you are buying the next place to live in. Upgrading for space, downsizing now the house is too big, or moving cities for work. Not your first purchase, and not an investment.

If this is your first property, the schemes and deposit rules are different enough that we have written that separately on the first home buyer page. If you are keeping the current place and renting it out, that is an investment loan and it is assessed differently again.

Second-time buyers usually know how a mortgage works and underestimate how much has changed since they last borrowed. These are the decisions that matter.

Buy first or sell first. The biggest question, and it is about risk rather than money. Selling first means you know your budget exactly and may need somewhere to live in between. Buying first means you keep the home you want and carry both properties for a period, usually through a bridging loan. There is no universally right answer, only the one that fits your market and your tolerance.

Fixed, variable, or split. Fixed buys certainty and costs flexibility: break costs apply if you leave early, and extra repayments are usually capped. Variable moves with the market and lets you repay ahead. A split does some of each, which suits people who want a predictable floor without locking everything away.

Offset or redraw. An offset account reduces the interest charged by the balance sitting in it, while keeping that money available. For anyone holding a cash buffer it is usually worth more than a small rate discount. Redraw does something similar and the money is generally less accessible.

Term. Rolling your remaining balance into a fresh thirty-year term makes the repayment comfortable and costs considerably more overall. If you have twenty years left on the current loan, keeping that term is worth considering deliberately rather than by default.

Finance can be arranged in a few weeks. Finding the house is what takes the time. The steps below are indicative, and assessment and valuation timeframes belong to the lender rather than to us.

1. Borrowing capacity first. What you can borrow now, which is often different from last time even on the same income, because assessment rates and expense benchmarks have changed.
2. Decide the sequence. Buy first or sell first, and if buying first, whether bridging or a long settlement is the better route.
3. Pre-approval. Worth having before you bid, particularly at auction where there is no cooling-off period. It is conditional, can be withdrawn, and typically lasts around three months.
4. Offer, then full application. Once you have a contract, the lender assesses it against its own criteria and values the property.
5. The lender decides. If approved, formal approval is issued and loan documents follow. Approval is the lender's decision alone, and it is never certain until it is given.
6. Settlement. Your conveyancer and the lender settle with the seller. Where you are selling too, the two settlements are usually aligned.

Bidding at auction is unconditional. There is no cooling-off period and no clause making the contract subject to finance, so if your finance falls through after the hammer you can lose your deposit. Pre-approval before an auction is close to essential, and it still does not cover the specific property.

A valuation below the contract price is the most common late surprise. The lender lends against its valuation, not what you agreed to pay, so a shortfall becomes extra deposit you have to find at short notice.

What you could borrow last time is a poor guide. Assessment rates, expense benchmarks and the treatment of credit card limits have all tightened, and an unused card limit can reduce your capacity by more than people expect.

Budget for the costs that are not the deposit. On an $850,000 purchase, stamp duty and settlement costs can add close to $30,000, and they are all payable before or at settlement rather than afterwards.