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You're moving on, but should you sell or keep your old home?

So, you have outgrown your lovely home & you’re ready to upgrade to the new mansion.

There is an overriding rule in property “never, never sell”, and if you look back on any property you’ve owned you’ll see why, but does it make sense in your current circumstances? What should you do – sell or keep your first home? The answer lies in a number of factors & carefully talking through your options with your advisers, as the answer is different for each person.

If you have worked hard to pay off the loan on your old home – and you need to borrow to buy your new home – your new home loan will obviously be larger, as will your new repayments.

Of course, you’ll also have a rental income from the old home which is probably subject to tax because you've paid down your loan on that side & your expenses against the income will be less. Its not a complicated exercise to work out the numbers in this scenario and in most instances I find that its cheaper per month to sell your home and reduce your home loan – and even consider investing elsewhere. But do the math.

Money isn't everything though, you may not want to sell, for a number of reasons – sentimental or financial. Is the area growing? An area you would want to return to? A great rental return? Potential for future development?

Capital gains tax may also be a consideration – your family home is usually not subject to capital gains tax, but once it’s an investment property the rules change. If you do plan on keeping the home make sure you discuss and record its current value with your accountant so that the growth that is subject to capital gains tax is quarantined from any price increase that occurred while you still lived there.

Your final consideration will be the raw numbers – can you afford to manage the repayments now and if you have no tenant for a while or if interest rates increase? There is no point in crippling your lifestyle and risking the lot, especially if the reasons are mainly sentimental.

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