Case Study / Upgrading / Simultaneous Settlement
Two PAYG borrowers in Queensland who wanted to move up, and wanted to do it with certainty. They sold their home first with a long settlement negotiated into the contract, which gave them a real window to find the right next home. Both properties then settled on the same day. No bridging finance, no rental in between, one move.
The clients were a couple in Queensland, both PAYG employees, ready to move into something bigger. They knew the sort of home they were after and they were comfortable with what it would cost. The one thing they wanted to get right was the order of operations.
It is the question every upgrader faces. Do you buy the next home first and then sell, or sell first and then buy? Get that order right and the rest of the move becomes straightforward, which is exactly how this one played out.
Each order has a real advantage, and the job is working out which one matters more to you.
Buying first gives you certainty about where you are going. The trade is that until your current home sells you are carrying both properties, which usually calls for bridging finance, and you are negotiating your sale to a timetable rather than to a price.
Selling first turns that around. You know your sale price and you know your deposit, so every number in the purchase is a fact rather than an estimate. The one thing it asks of you is time to find the next home, because a standard settlement of 30 to 60 days is a short runway when you want to choose well.
So the question was how to keep the certainty of selling first and give themselves a proper runway at the same time. That turns out to be a contract term rather than a finance problem.
They sold first, and the sale contract carried a long settlement.
That one term did the heavy lifting. The price was agreed with no pressure on them at all, and instead of a month to find their next home they had a genuine window to look properly, miss out on one or two and still be completely comfortable.
Shane had their finance organised while that window was running, so when the right property came up they could move on it immediately. They bought for $1.420 million, and the purchase contract was written so its settlement date lined up with the settlement on the sale.
That is a simultaneous settlement. Both matters settle on the same day and the proceeds from the sale flow straight through to the purchase. There is never a day where they own two homes, and never a day where they own none.
Aligning the dates also meant no bridging finance was needed anywhere in the structure. Bridging is the usual answer to this problem and it does the job well when you need it, but it brings a second set of loan costs and interest on a peak debt figure. Here the timing did the work instead.
The old home sold for $986,000, the new one was bought for $1.420 million, and the new loan is $1.199 million on a variable rate with principal and interest repayments. That puts the end LVR at 84.45% including capitalised lenders mortgage insurance.
Going above 80% was a deliberate choice and the right one for them. Capitalising the lenders mortgage insurance meant it sat inside the loan rather than coming out of their pocket at settlement, so their cash stayed where it was useful to them. What that decision bought was the home they wanted, in the market they wanted it in, this year rather than in another two or three.
Both settlements went through on the same day. They moved once, out of the old house and straight into the new one.
Three things are worth sorting before the sale contract is signed.
Start with the settlement length. There is no standard long settlement, so decide what you need before your agent begins negotiating. Ninety days is common and longer is often achievable, particularly with a buyer who is selling a property of their own.
Then the deposit on your purchase. Your equity stays tied up in the old home until settlement day, but the purchase contract will ask for a deposit at exchange, usually 10%. A deposit bond covers that gap. The vendor accepts it in place of cash and the full amount is paid at settlement from the sale proceeds.
Last, the finance. A purchase where the deposit comes from a signed, unconditional sale makes for a clean file with a lender. Getting approval early is also what makes a same-day settlement work, because both parties have to be ready on the day.
Selling first gives you certainty. Until your home sells, the budget for your next one is an estimate, and the moment it sells it becomes a fact, along with your exact deposit. That makes every decision after it easier, the finance included. The common concern is the time pressure it creates, and a long settlement negotiated into the sale contract is what solves that. It is worth working the order out with your broker and your agent together, before either contract is signed.
A simultaneous settlement is where the sale of your existing home and the purchase of your new one settle on the same day, with the proceeds from the sale funding the purchase. Your conveyancer or solicitor coordinates both sides. Done properly you never own two properties at once and never own none, so you avoid both bridging finance and a rental in between. It does require both matters to be ready on the day, so the finance on the purchase needs to be formally approved well beforehand.
Not necessarily. Bridging finance exists for the situation where you buy before you sell and have to carry both properties for a period. If you sell first and align the settlement dates, there is no overlap to fund, so there is nothing for bridging finance to do. Bridging still has its place, particularly when the right property appears before you are ready to sell, but it is worth knowing it is not the only route.
Yes. Lending is national, so the process is the same whether the property is in Coogee or Queensland. Both the sale and the purchase in this case were in Queensland and the whole file was handled by phone, email and video. I am based in Sydney's Eastern Suburbs and arrange loans Australia-wide.
This case study describes a real loan Shane arranged, anonymised. Every situation is different and past results are not a guarantee of what a lender will approve for you. Settlement periods, simultaneous settlements and lenders mortgage insurance premiums vary between lenders, between states and from one contract to the next, and the conveyancing side of a sale and purchase is handled by your solicitor or conveyancer rather than by Shane. The information on this page is general in nature and does not take your objectives, financial situation or needs into account.
Shane will work through the order, the timing and the finance before you go to market, so the sale contract you sign already suits the purchase you have not made yet. $0 brokerage fee.
Shane specialises in helping clients across Coogee, Clovelly, Bronte, Bondi, and all surrounding Eastern Suburbs.