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Strong Property Prices Tempting Owners

Strong Property Prices Tempting Owners

Kapiti Coast, Tuesday 10 April 2018 - Wellington’s super strong property prices are tempting homeowners to upgrade their existing house, but a local mortgage broker is advising people to think twice before leaping into bridging finance.

House prices across Wellington continued to climb in March, up 8.2 percent from March 2017 to $644,567 according to QV data. Pope & Co., leading Wellington mortgage advisers are increasingly hearing from homeowner’s keen to capitalise on the rising house prices and step up the property ladder. Craig Pope, Director, says this can be an expensive decision.

“The risks and costs of buying before selling can be easily overlooked. To do this, you will need bridging finance to cover both mortgages until you sell, and this type of finance can be tough to get. Usually, bridging finance loans last around three months, so if your mortgage is $400,000, and your new home costs $700,000 you will be liable for $1.1 million of lending for that period,” says Craig Pope.

There are other risks to consider before choosing to buy and then sell.

“What if your home sells for less than what you want? What if it takes longer to sell - can you cover all the associated costs? Wellington is prone to earthquakes if one was to hit - are you covered for both properties and will earthquake damage affect the sale price?” asks Craig Pope.

“Anecdotally, we’ve heard some homes aren’t selling as fast as they were a few months ago, so you might need to sit tight and wait for a sale. Some buyers could also be in a ‘chain’ and settlement may not be as fast as you think.

“Selling then buying can also be tricky to navigate, particularly in our incredibly tight rental market. Fewer rental homes are available, and competition is fierce. Where will you live while you look to buy?

“Our advice is to carefully consider if you need to move, or are you just being tempted by high sales prices? Put a plan in place with an independent mortgage broker. Extending your current house, or renovating it, could be just as good an option, particularly if you’re happy with the neighbourhood you’re in. Equity in your home should be highly valued, don’t look to trade it up or water it down, if it’s unnecessary,” says Craig Pope.

Buyers considering their next move are advised to consult a registered mortgage broker for impartial advice.

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