Upgrading a property? Know your borrowing Capacity

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Upgrading to a bigger property often comes with heaps of paper works and involves a far complicated process than buying your first home. As a first home buyer, all you would be looking forward to is buying a new home, but upgrading a property involves both your existing home and the new one you would want to buy. This being said, upgrading to a bigger property requires the transaction of two properties usually within a single timeframe.

For your transaction journey to go smoother, there are a few things that you need to consider. From arranging for bank valuation to assessing your borrowing capacity and exploring the options for bridging finance, every step is essential.

Likewise, your borrowing capacity determines the path you take while upgrading your property. Depending upon your borrowing capacity, you can either sell your current property now and buy a new one later or sell your current property and buy a new one simultaneously. If your borrowing capacity permits, you can buy a new property first and sell the existing one later or even keep both the properties.

Knowing your Borrowing Capacity

Before opting to buy/upgrade a property you must always keep track of your borrowing capacity so that you would have a clear mindset towards your investment. Often, your borrowing capacity may vary from lenders to lenders, but the criteria remain almost similar. Certain major factors such as your income, savings and family structure influence your borrowing capacity. Along with it, your spending habits and good credit conduct also affect your borrowing capacity significantly.

When upgrading your property, your increased valuation itself is not enough. The lenders would like to know if you can meet the loan repayments for both your existing property and your new one. Any adverse changes to your financial circumstances since the last purchase of your property would affect your borrowing chances. Under such circumstances, it might even be unlikely for you to borrow any further. As lending regimes and credit policies frequently change, it is always best to take advice from the experts during such situations.

While upgrading can be a lot on your plate, as it involves both your existing property and the property you are upgrading to, you can always have a mortgage broker assisting you in making purposeful financial decisions. Your mortgage broker can not only calculate your borrowing capacity but also guide you in the right direction through the entire process.

If you are willing to make a bigger investment and possibly planning to sell one of your existing assets, who better to have by your side than our experienced mortgage brokers! Book an appointment with us, and we will guide you right through the entire process.

Author:

Kiran Thapa

Ushma Shrestha

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