If you’re wondering whether you should upgrade your home, it means you already know that it’s time to upsize. When you bought your first home, life circumstances were different, and you’re perhaps looking for something bigger, and more practical. 

But is now a good time to sell or buy a property? Many fear we’re entering a recession, but that doesn’t mean that you should give up on buying your dream home. 

So is buying a house during a recession or a downturn a wise decision? “I think during a slow market it’s a good time to upgrade your home,” says Emmanuel Guignard, Senior Mortgage Broker and Director at Loanscope.

Why should you upgrade your home?

Before we get into why now is a good time to upgrade your house, you should make sure that you’re making the right decision – at the right time. If you’re not happy with your current home and/or you already know what you’re looking for, a slow market will give you the leisure of shopping for the best choice. 

Another reason to consider upgrading your home is if you have built enough equity in your current home. Most Australians don’t realise that they are holding high equity levels, which they can use for an upgrade. For example, according to a 2021 report, in Melbourne alone equity rose approximately 180 per cent and the LVR (Loan-to-Value Ratio) went “down from 80 per cent to 58 per cent.”

Benefits of upgrading your home in a slow market

If you have the ability to upgrade your home right now, you are going to enjoy benefits that you don’t have in a busy market. 

  1. Real estate agents are more attentive
  2. You have less competition
  3. You have more time to choose
  4. Home sellers can be more accommodating
  5. You will pay less for your upgrade

Real estate agents are more attentive

The concept is simple: when the market is slow, real estate agents will be a lot more attentive. There aren’t as many homebuyers on the market, and you will be well looked after. 

Real estate agents will have more time to spend with you, will give you more regular updates and you won’t have to deal with the frustration of being ignored. 

You have less competition 

Less competition means that buyers have more choices. It’s really hard to get any attention when there are 50 potential buyers at an open for inspection. Buying in a busy market can be very frustrating when agents ignore you and the property you were interested in ends up selling without you even knowing an offer was made.

However, in a slower market you have much less competition which gives you unique advantages like having the upper hand when it comes to negotiation. 

You have more time to choose 

Another advantage of upgrading your home right now is that you don’t have to rush into buying a house less than perfect because the market is so competitive. 

Being in a position where you have time to shop around and find the best home and deal for you means that you will be less likely to make a lot of compromises when it comes to choosing and buying your dream home. 

Home sellers can be more accommodating

There’s no denying that Australian mortgage holders are having a tough year with climbing interest rates (as of now, the RBA interest rates have risen to 2.35%). And with mortgage holders set to face higher repayments, some might choose to sell their house.

In addition, because the market is slower, home sellers are more flexible, and you will most likely get a better deal. 

You will pay less for your upgrade 

While you are likely to get less when selling your property in a slow market, you will also pay less for your upgrade.   

“If the market is down 10% but you sell for $800,000 you have only lost $80,000 when 10% of your next property at $1.5mil is $150k,” says Guignard. 

Plus, even banks are easier and faster to deal with as their volumes are down. They are also a little more flexible on rates as they are fighting for a smaller market share.

When should you upgrade to a new house?

Before upgrading, you should make sure that you have the buying capacity to do so. Securing finance is a high priority for everyone, and you need to make sure that your choice to upgrade will assist you in building wealth, living comfortably and not adding extra worry or strain on your life and finances. 

Perhaps you think you know how this works, but it’s most likely that since buying your first home the fees have changed. To make sure you’re starting off the right way, check out our buying cost calculator

What to do with your current home

You might be in the financial capacity of upgrading your home without having to sell your current one. Keeping your current property until the market picks up is the best winning scenario for buying in a slow market – as you win both ways. Check out our selling cost calculator to find out more. 

Because there is less stock in a down market, you might consider buying first and seeing if you can do bridging finance. 

What is meant by bridging finance? A bridging loan is a loan that covers the time between buying the new house and selling your current one. Different lenders have different loan terms, with some banks giving you a 12-month timeframe. 

How much equity do I need for a bridging loan? There is no set rule, but you do need equity for a bridging loan. Our mortgage brokers recommend that you have more than 50% for the loan to be worth it. 

Are you ready to upgrade your home?

Upgrading in a slow market does come with its perks, and with an experienced mortgage broker by your side you can make sure that you are not only making the right house choice, but that you also get the best rates and advice. 

Contact Loanscope today and find out how easy it is to finance your next upgrade. 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Emmanuel Guignard (MBA)
Director & Principal Mortgage Broker
With over 15 years’ experience in the finance industry and a recently completed MBA in Financial Planning, Emmanuel leads the broking team at Loanscope. His experience includes working with a wide range of property investors, from first time buyers to investors with large property portfolios. This includes handling complex applications involving trusts, company structures and self-managed super funds. He also operates as a qualified mentor to other mortgage brokers via the FBBA mentor program.
Emmanuel Guignard