This article goes through 6 main considerations you should make when looking at whether you sell your current home to upgrade, or keep it as an investment.
1. Can you even afford to do keep it? The first step is to work out if it's even possible. This would involve talking to a broker or bank and getting an assessment of your lending ability.
Obviously if you can't do it, consideration done.
2. Will keeping it reduce what you can spend on your new home? You may be able to keep the property, but make sure that keeping it is actually going to allow you to buy what you want!
3. What additional costs will be involved here to do this? When you take on more debt, there can be additional costs such as lenders mortgage insurance. This is a one off cost that covers the bank in the event you default, and the more you borrow relative to your total assets, the higher it is! You'll need to speak specifically with your lender but this cost could run up to $30,000.
4. Are you comfortable with that much debt? The sleep at night test - if you have two properties with two mortgages, are you able to sleep at night? Or is it just added stress.
5. Is your previous property actually a good investment? It may have been a great home, but may not actually be a good investment. When choosing a property to invest in, you may have different considerations than one you wish to live in.
6. Will this get you closer to your goals, or is it a distraction? Ultimately you need to consider if keeping the current property is even compatible with your goals and what you want to achieve. It may be a nice idea, but it could also be holding you back.
If you are comfortable with all these questions, keeping your current home as an investment property may be a good idea. You can always give us a call to discuss it in further detail. We can also provide financial forecasts to give you the hard numbers in detail, which can help you make the decision.
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