B26 - Selling and Buying a Cheaper Home

When thinking about selling your current home and buying a cheaper one, you must first assess the value of your home and the 'equity' available to you from that property.

Equity is the money you have left after any mortgage on your property has been deducted from the sale price.

You will need to include the expenses involved in selling a house (such as legal, bank, advertising and real estate fees, moving costs and final utility bills) when you are working out how much money your house sale will give you.

Selling your current home and buying a cheaper one could involve:

Valuing your home

The most readily available source for estimating the value of your home is your property's capital value (CV). The CV is an estimate of market value at the time of assessment. Generally your property's CV is assessed every three years.

You will find your property's current CV on your most recent rates bill. You can request a copy of your rates bill from the council. Many councils also allow you to look up rates assessments online.

Current market value can be different from the CV, particularly if the last CV assessment was done some time ago or if the housing market has experienced a rapid change in house prices since that assessment.

For a more accurate estimate of what your home would be likely to sell for in today's market, you can use Quotable Value's (QV's) E-valuer. This is an automated value estimate based on recent sales in your neighbourhood. You need to pay for this information.

You will need a registered valuer to get the most accurate estimate of the value of your home.

Buying a cheaper home

To get an idea of where you can find cheaper homes, see the QV website for recent residential sales information for all property types by suburb throughout New Zealand.

You can also get an idea of the going prices by researching advertised asking prices. However, asking prices can be hard to discover when the housing market is buoyant as many sellers elect to sell by auction.

Real estate websites such as trademe and realestate.co.nz can help give you an idea of the different types of properties currently on the market in a given neighbourhood.

Pros

Cons

Homework

What do I need in order to take this option?

You need the funds and the right home to be available. Mortgage-free or small-mortgage homeowners whose home has a high value have more flexibility to find a less expensive home that fits their needs well. However, home-owners who have high mortgages or low-value homes will have fewer choices.

Could this option limit my future choices?

Maybe, it depends on the equity you have in your current home and the potential equity generated in your new home.

For more information