How to Move Cities When You Have a Mortgage

With remote work becoming increasingly common, relocating to smaller, more affordable cities is now viable for many professionals. However, before making this move, several crucial factors require careful planning.

Securing Your Employment

The first priority is ensuring your job can follow you to your new location. Get written confirmation from your current employer approving remote work arrangements, or secure a signed employment contract with your new employer. "Get the practical details written into your contract to ensure that when you get that lifestyle block you'll definitely still have a job to pay for all those avocado trees."

Bank Requirements Under Responsible Lending Act

Banks must verify that you'll maintain income after relocating. This requires either written employer confirmation of work-from-home approval or a signed employment contract with a start date in your new city.

Sell First or Buy First?

One of the biggest decisions when relocating is whether to sell your current home before buying in your new city, or buy first and sell later. Each approach has trade-offs.

Sell First, Then Buy:

• •Pros: You know exactly how much deposit you have, no pressure to sell quickly, no bridging finance costs, cleaner mortgage application
• •Cons: You may need temporary accommodation (rent, storage costs), you could miss out on properties while waiting for your sale, potential for property prices to rise before you buy

Buy First, Then Sell:

• •Pros: You can move directly from old home to new home, no temporary accommodation needed, you secure your new property before selling
• •Cons: Requires bridging finance (expensive), pressure to sell your old home quickly, risk if your old home sells for less than expected

Bridging Finance Explained

If you buy before selling, you'll likely need bridging finance-a short-term loan that covers the gap between purchasing your new home and settling the sale of your old one.

How bridging finance works:

• •The bank lends you enough to cover the new purchase plus your existing mortgage
• •Interest rates are typically 1-2% higher than standard mortgage rates
• •Most bridging loans have a maximum term of 6-12 months
• •You pay interest on the full bridging amount until your old property sells

Example: You owe $400,000 on your current home and want to buy a $600,000 property in your new city. The bank might provide a bridging loan covering both, totalling $1,000,000. At 7% interest, that's around $5,800/month in interest alone until you sell.

Important: Banks will stress-test whether you can afford both properties if your old home doesn't sell. Not everyone qualifies for bridging finance.

Timing Your Move

Coordinating all moving pieces simultaneously presents challenges. Living in temporary accommodation initially can help you become familiar with your new area before purchasing. This sell-first approach is often less stressful and less expensive than bridging finance.

Important KiwiSaver Consideration

If using KiwiSaver funds, "you are required to live in the house for at least the first six months." Failure to occupy the property could jeopardise your withdrawal eligibility.

Recommended Planning Steps

The article concludes that short-term accommodation costs are worthwhile investments for achieving a better lifestyle-and often cheaper than bridging finance interest.