Buying a house before selling yours
Thinking of buying a new home before selling your current house? But what about buying first and selling second? When making the decision to buy or sell first, here are a few key factors to consider.
Usually, homeowners sell their current property before purchasing a new one. But there are instances when buying a new home first makes much more sense. If you need to upsize or downsize but haven’t sold your current property yet, there are ways to make it work.
In this article, we discuss how you can handle this endeavour smoothly while avoiding common pitfalls.
How do you buy a new house with an existing mortgage?
Here’s a quick step-by-step guide on selling and buying a new house at the same time.
Step 1: Find a new property
Figure out what you need in a new home. For example, if you’re a young family looking to expand, your current one-bed, one-bath home may not fit your future needs. It may be time to look for houses with extra room and close to schools.
Conversely, empty nesters may not feel the need to own a large property with a lot of extra, unused space. They may also prioritise living in quieter neighbourhoods or places that are much more accessible.
During your house search, keep your needs in mind to help narrow down your options. Make sure your new home aligns with your lifestyle needs moving forward.
Step 2: Put your house on the market
Selling and buying a house at the same time is difficult, but not impossible. Get a head start on selling your home by putting it on the market straight away. Talk to a real estate agent and discuss sale strategies to better your chances of making a sale.
The sooner you can put your home on the market, the sooner buyers will be able to see it. The goal is to get your home sold sooner rather than later. Simultaneously selling and buying may seem a bit hectic, so ensure you’re organised and keep up with everything that’s happening.
Step 3: Apply for a bridging loan
A bridging loan is a short-term loan that is there to help ‘bridge’ the gap between selling your current property and buying a new one. This way you may not need to take out a separate mortgage to purchase your new property.
With a bridging loan, the lender will provide you with financing for your new property. Your current mortgage will be refinanced or consolidated into the bridging loan. Your total bridging loan depends on how much your new property costs and how much is left on your current home loan.
Step 4: Finalise your property purchase
Once you’ve received your bridging loan, you can finally purchase your new property. Make sure to inspect the home carefully for any issues. If you do find any problems, talk to the seller about fixing them before completing the sale.
Review the sale contract and other documents carefully before signing. Ensure you’ve got everything ready and organised so as not to delay the final steps of the transaction. After everything has been signed, the seller can hand over the keys, and you should be ready to move into your new home.
Step 5: Sell your old home
Bridging loans typically only have six- and 12-month terms. Because of this, you need to sell your home within that timeframe to avoid additional interest costs. The goal is to sell as quickly as possible without leaving money on the table.
Talk to a real estate agent and discuss ways to better market your property. It’s important to sell your old home within the agreed-upon bridging period.
When you sell your old property, the profit will go into paying off the peak debt on your bridging loan. After selling your old home, your bridging loan will close and convert into a typical mortgage. This means you’ll pay as you would for a typical home loan.
Essential factors to consider before buying a new house
Buying a new home while selling your current one is not an easy task. Think about the following factors carefully and how they can affect the outcome of your home purchase and sale.
Property market conditions
Always assess the market first before deciding on a course of action. If the property market is on the rise, for example, it may be better to buy a new property even if you have an existing mortgage. This means buying a home before prices go up even more and selling when prices are at their highest.
Your financial flexibility
Will you be able to handle the financial strain of buying a new home while selling your current one? It may take longer to sell your old home than expected, which can result in additional costs, repayments, and fees. Discuss your finances with a professional to see if this is the right choice for you.
Your borrowing power
Understand how much borrowing power you have when buying a new home. If you’re still paying for your home loan, it can reduce the amount you’re able to borrow. On the other hand, if you have significant equity built up in your current home, this can help secure funds for your next property.
Use our online borrowing calculator to see an estimate of your borrowing capacity.
Pros and cons of buying a new house before selling your current home
Buying another property while selling an existing house isn’t for everyone. Before deciding, it’s best to weigh the advantages and disadvantages.
Pros
- Get the house you want immediately. Sometimes a property is too good to pass up, and waiting until you sell your old property could mean missing out on your next dream house. You can take better advantage of current market trends, too.
- No need to rent temporary accommodation and save on moving costs. Since you’ll have a new house to move into, you won’t have to spend time searching for temporary residences. This means you’ll only need to move once, which can help you avoid additional moving expenses.
- A bridging loan can make the experience easier. With a suitable bridging loan, you can get more flexibility with your mortgage. You can add costs to your bridging loan, so you’ll have a more streamlined repayment.
Cons
- The interest on bridging loans is typically higher than a standard home loan. You may be paying higher interest rates on a bridging loan during the bridging period, compared to a standard home loan.
- Selling a home in a limited timeframe can be daunting. Putting a house for sale can be overwhelming in and of itself. It becomes especially difficult when you’re buying a new house at the same time. Carefully select the bridging finance period that suits you and your estimated selling timeframe.
Apply for a bridging loan today at loans.com.au!
If you’re determined to sell and buy a new home at the same time, a good bridging loan can help you out. At loans.com.au, we offer competitive rate bridging loans that can help you get your dream home while finalising the sale of your old one.
For more information, don’t hesitate to get in touch with us. Our friendly lending specialists are more than happy to discuss your lending needs. You can get started by applying online!
Disclaimer: The information provided in this article is general in nature and does not constitute financial or legal advice. Please seek independent professional advice tailored to your personal circumstances before making any financial decisions.
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About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
