Scenario 1: Selling before buying
- If you sell your existing home, you’ll have $400,000 profit once your existing mortgage has been paid. If you use this as a deposit, you’ll have to find another $400,000 to buy the new place.
Scenario 2: Keeping the first home
- If you keep the property, then you’ll still have the existing $100,000 mortgage. On top of this, you’ll need to find another $800,000 for your new place.
While your debt is larger in the second scenario, you now own two properties rather than one. And these properties have a combined worth of $1,300,000 (as opposed to $800,000 in the first scenario).
On top of this, you might also get the benefit of ongoing rental income as well as any capital gains made over time. Then there are the potential tax deductions – depending on if the property is negatively or positively geared. But on the downside, if you end up selling your property after holding it as an investment, it’s likely you’ll have to pay capital gains tax too.
All in all, there’s a lot to consider! As such, it’s a good idea to speak with a financial adviser as you work out which option best suits your financial needs and goals.