Buyers who are worried about a sudden decline in their home equity may want to consider selling before it gets too expensive.
Here are five key points:What to expect when you need to sellYour savings will be limited, and that will affect how much you can borrow, the Reserve Bank says.
“Some investors may be tempted to consider closing the door on a home they are holding for a while, while others may find it less likely,” it says.
“For the rest of us, however, it is prudent to consider buying at a lower price and to assess whether the price has gone up over the past 12 months.”
Read more about housing:The Reserve Bank also advises that you may need to consider a mortgage in order to buy.
It says if your credit score is low, “the probability that you will be able to borrow more in the future is lower”.
But the bank cautions, “you may want a smaller mortgage if you are a senior person with limited household income, for example”.
In some instances, it also advises not to buy if you have “recently experienced a sudden increase in the price of your home”.
In this case, you can still take advantage of the property market’s discount, the bank says.
But if you’ve been holding on to your home for more than 12 months, “a small down payment could be necessary”.
“A lower down payment is a way of ensuring that you are not getting into an expensive position where you need a large down payment in order for the property to go on sale,” it said.
What to do if you need help to sell your homeIt may be tempting to sell at a reduced price, but you may have to consider the possibility of a loan being put on hold and/or you may find that you need more money to pay off the mortgage, it says, adding that if you do need to borrow money, you may be able, or even be able afford, to buy at a higher price.
In this situation, it’s important to consider your assets, the risk you are taking on, and whether you are willing to take on more debt in order that you can sell at or below the current market price.
For instance, you might have more savings and have less debt than you would like to have, so you may want more to go into the property and the property can sell for a higher amount, the report says.
You should also consider whether you can put up another deposit on the property.
If you can, the deposit will help you sell your property at a profit, but it will not guarantee you an offer to buy, it adds.
“You will need to be very careful not to put your home in the same condition as it is currently sitting,” it advises.
If the property is currently in bad shape, you should also make sure that you “have a good plan for how you can get the property back into better condition in the near future”.
But you may not want to risk a loss of value by selling your home because you will need the money to buy more property, it warns.
The Reserve bank also advises against buying a property at an excessive price.
“Buyers who do not want a property that is too high in value, or is already sold, should consider selling at a price that is lower than the current value of the home,” it adds, saying that you should not buy at prices below your income.
“It is important that you do not purchase a property in a bubble,” it warns, adding “you need to look at the current condition of the house and its market value.”
What to ask for in a loan applicationThere are a few different ways you can ask for a loan, the RBA says, including the type of mortgage you want, the amount you need, the repayment period and whether your debt will be discharged in the event of an insolvency.
You can also ask for more information about the property, including whether it’s worth buying, whether you need any extras, and how much it’s going to cost to buy it.
The RBA advises that, “it is important to check with the lender that you have sufficient funds available to pay for the transaction.”
Read about how to get a loan from a lender:What you need when you applyFor a home sale, the lender will ask you questions about the house you want to buy and its value, the size of the deposit you need and any extras.
You may also be asked questions about your finances, including if you owe more than the mortgage is worth.
The lender will also ask you for information about your home’s previous owners, who bought it before you, as well as what happened to the house after you bought it.
You’ll also be required to provide any documentation related to the property including:Documents such as mortgage agreements and bank statements.
Any documents that show how you are paying for your mortgage.
The bank will