As your family grows and your needs change, upgrading your family home becomes a natural progression. For current and former Australian Defence Force members, this journey comes with unique opportunities and considerations that civilian borrowers don't typically encounter.
Understanding Your Home Equity Position
When you're ready to upgrade your family home, your existing property's equity becomes your most valuable asset. Home equity represents the difference between your property's current market value and your outstanding loan amount. The Australian property market has seen considerable growth in recent years, meaning many ADF families have built substantial equity in their homes.
This equity can be leveraged in several ways:
• As a deposit for your new property
• To avoid or reduce lenders mortgage insurance (LMI)
• To improve your loan to value ratio (LVR)
• To increase your borrowing capacity for the upgrade
ADF-Specific Home Loan Advantages
Defence personnel enjoy several unique benefits when applying for a home loan. These advantages can significantly impact your financial situation and make upgrading more achievable:
Interest Rate Discounts: Many lenders offer exclusive interest rate discounts to ADF members, which can save thousands of dollars over the life of your loan.
LMI Exemptions: Some lenders waive lenders mortgage insurance for defence personnel, even with loan amounts up to 100% of the property value.
Flexible Income Assessment: Lenders often consider defence allowances and benefits when calculating home loan repayments, potentially increasing your borrowing capacity.
Timing Your Property Upgrade
The timing of your upgrade can significantly impact your financial outcome. Consider these factors:
- Market Conditions: Monitor the property market in both your current location and desired area
- Posting Cycles: Align your upgrade with potential postings or career changes
- Interest Rate Environment: Consider whether fixed interest rate or variable interest rate options suit your circumstances
- Stamp Duty Implications: Factor in stamp duty costs for your new state or territory
Home Loan Options for Your Upgrade
When upgrading your family home, you have several Home Loan options to consider:
Selling First, Then Buying: This approach provides certainty about your available funds but may require temporary accommodation.
Buying Before Selling: Allows you to secure your new home first but requires bridging finance or sufficient equity to service two loans temporarily.
Refinancing Strategy: Sometimes upgrading involves refinancing your existing loan to access equity while retaining your current property as an investment.
The Application Process
The Home Loan application process for upgrades involves additional complexity compared to first-time buying. You'll need to provide:
• Recent bank statements for all accounts
• Proof of income including defence-specific allowances
• Details of your current property and loan
• Information about the property you're purchasing
• Evidence of your deposit source (equity, savings, or both)
A streamlined application process becomes crucial when you're coordinating the sale of one property with the purchase of another. Working with Home Finance & Mortgage Brokers who understand defence circumstances can make this process more manageable.
Getting Pre-Approved
Home Loan pre-approval is particularly valuable when upgrading. It provides:
- Clear Budget Parameters: Know exactly what loan amount you can access
- Negotiation Strength: Sellers take pre-approved buyers more seriously
- Timeline Certainty: Understanding your borrowing capacity helps coordinate timing
- Rate Protection: Some lenders offer rate protection during the pre-approval period
Maximising Your Financial Position
Consider these strategies to optimise your upgrade:
Offset Account Benefits: An offset account can reduce interest payments on your home loan interest rate calculations.
Fixed vs Variable Rates: A fixed interest rate home loan provides payment certainty, while variable home loan rates offer flexibility.
Lender Comparison: Access Home Loan options from banks and lenders across Australia to find the most suitable terms.
Understanding Home Loan Rates
Home Loan Rates vary significantly between lenders and loan products. Defence members often have access to preferential rates that aren't publicly advertised. When comparing rates, consider:
• The comparison rate, which includes fees
• Whether the rate is fixed or variable
• Any rate discounts available to ADF members
• The loan features included
Planning for Ongoing Costs
Upgrading your family home involves more than just securing finance. Budget for:
• Moving costs and temporary accommodation
• Property inspections and legal fees
• Council rates and utilities connections
• Potential rental income if keeping your previous home
• Insurance for both properties during any overlap period
Upgrading your family home represents a significant financial commitment, but for ADF families, the unique benefits available can make this goal more achievable. The key lies in understanding your options, timing your move appropriately, and working with professionals who understand the defence community's specific needs.
Call one of our team or book an appointment at a time that works for you to discuss your family home upgrade options.
