We've been asked this questions a lot recently so we thought.... let's turn it into a blog post!
When buying and selling, there are a few hurdles you need to overcome. One of which is having a deposit.
There's a bank requirement for a deposit of 20% on the new purchase and there's a Sales & Purchase agreement requirement typically of 10%. This is where it might become quite confusing.
The 10% deposit for the new purchase is what you will be required to have available once you go unconditional.
The 10% deposit that you'll have from the sale from your house (that your purchaser will pay) always has the agents commission taken out of it first.
Here's our scenario....
You have sold your owner occupied property for $800,000 and are buying a new property for $1mil.
For the property you are buying, you need a bank 20% deposit of $200,000 but only initially be required to come up with the Sales & Purchase requirement of $100K.
If you have sold for $800K, in theory you should have received $80,000 minus agent fees
(Agent fees for the sake of this exercise we have budgeted $35K).
$80,000K deposit from your purchaser minus your agent costs of $35K, leaves you with $45K of available funds.
This means that for your 10% deposit of $100K for the new purchase you are $55K short.
So what are your options here?
1) The most ideal option here is to have savings or the ability to call on family for a short term loan that is repayable on settlement of both properties.
2) Your second best option is that we can approach the bank and ask them to temporarily advance the $55K as a loan until settlement happens. This can be tricky to facilitate if we are swapping banks at this time. Also don't forget that you will be paying interest on the $55K once we have drawn this down.
Whilst this might sound intricate, this is something we deal with on a daily basis and can happily talk you through the steps.
Hope that helps!
Jess & the team xox