You have your own house but want to move. What will you do? Do you sell your current home first or do you buy a new one first? Both options have their advantages and disadvantages. We have outlined them for you.
Buy First
Do you have a specific new home in mind? This might be a reason to buy first, so you don’t miss out on the opportunity. With some luck, you can coordinate the transfer of both properties to avoid having double housing costs.
What if your current home sells for less?
However, there are also risks. One of them is that your current home may sell for less than you expected. If you need the equity from the sale for purchasing your new home, you may need to take out a bridging mortgage. Lenders often consider 90% of the appraised value of your current home. If the property does not yield enough to repay the bridging loan, you may have to increase your new mortgage or repay the bridging loan with your own funds.
Possible double housing costs
Another risk is that it takes longer than you expected to sell your old home. In that case, you will temporarily have double housing costs, including the mortgage expenses for the old and the new homes. Additionally, you may have to pay mortgage interest on the bridging mortgage.
Carrying over a low mortgage interest rate may not be possible if you currently have a low mortgage interest rate, you would naturally want to transfer it to your next home. Some lenders may only allow you to carry over your mortgage interest rate if you sell your old home first.
Sell First
Selling your current home first has one significant advantage: you know exactly what your home will sell for. This means you have a clear understanding of your financial options when buying a new home. Also, your equity is often available immediately, eliminating the need for a bridging mortgage.
Temporarily without a home
A downside is that if you don’t immediately find another home to buy, you will be temporarily without housing and will need to arrange alternative living arrangements. This also means having to move twice.
And if you have a specific home in mind that you want to purchase, there’s a good chance it may be gone by the time you sell your current home. You might be able to negotiate with the seller to purchase the new home with the condition that your own home is sold within a certain timeframe, but it’s uncertain whether this will be accepted.
Mortgage Advisor
Before making a decision, it’s essential to consult with a mortgage advisor. They can inform you about your options, calculate your new monthly expenses, and guide you on the necessary steps.
Don’t forget to make use of a reputable real estate agent. They can provide you with excellent information, help you create a comprehensive buying and selling plan, and assist you in making an informed choice between buing first or selling first.
