Buying a new house already seems like a big and challenging task. Buying a house before selling your current home is an even more difficult situation. You already have your hands full with your new home, yet you still need to deal with the pressure of selling your current home. Is it really a good idea to buy a house first? Or should you wait to buy until you sell your current home?
Here are a few tips on how to buy a house before you sell yours.
The Pros and Cons of Buying a House Before Selling Your Current Home
Pros of Buying a House First
- When in a seller’s market – When you are buying in a highly competitive market where you need to bid on a few properties before you close a deal, it’s a good idea to secure a home first before selling your current home
- Save money on renting – Unlike if you sell your house first, you don’t need to worry about renting or where you will stay because you already secured a new home.
- Remodeling the new home – When you plan to remodel or renovate your new purchase before moving in, it might be a good idea to finish that project before selling your current home.
- A big family – It’s difficult to transition between two homes when you have a big family to manage. Buying a new home can make this easier as you will have more time to prepare to stage your current home for selling without worrying about where your family will stay.
Cons of Buying a House First
- Managing two mortgages – When you buy a new home before selling your current home, you might be committed to paying two mortgages at once.
- Limited capital – Your capital will be limited if you don’t have enough cash because you haven’t sold your current home. Meanwhile, your borrowing capacity might also be limited if you have an ongoing mortgage.
- Pressure to sell – There might be more pressure to sell your home at a lower price because of the bills that you need to pay for both houses at the same time.
Tips for Buying a House Before Selling Your Current Home
1. Determine Your Buying Power.
The first step to buying a house first is to determine your buying power. When you buy a new house, you need to take in mind that there’s still no assurance when you’ll be able to sell your current house and for how much. Since you have not liquified this asset, your capital might be limited. Make sure that you seek financing to determine how much you can borrow, which could be reduced if you are still paying a mortgage while applying for a new home loan.
If you are in a favorable position to afford buying a new home with no problem, then buying a home before selling is definitely a good option.
2. Avail the Bridging Loan.
The Bridging Loan is a type of home loan that helps homeowners finance the purchase of new property while their current property is being sold. This loan is specifically designed to help the financial gap that homebuyers experience between two home loans. A bridging loan covers any cost from buying your new home until you’ve sold your current property, making it easier and more convenient for homeowners to transition.
3. Extend your Settlement Date.
Once you buy your new property, you can negotiate to extend your settlement date with the seller to give you more time to sell your current home. Bridging loans can only last for up to six months if you are purchasing, or twelve months if you are building a new house. Negotiating to extend your settlement date for at least 12 to 16 weeks can help delay the deadline of your bridging loan and give you more time to look for a buyer.
Consider all the factors to determine whether buying a house first before selling fits your needs. Make sure to seek pre-approval and avail the bridging loan to help you have a smoother transition. This will definitely help you sell the house at a favorable price, help you manage your mortgages, and take the pressure off of you as a seller.
Contact Buying Perth Real Estate to help you have a smooth home buying journey. Get a free consultation from our experienced buyer’s agents today when you contact Clive at (08) 6215 0200 or 0412 926 190.