Should I Buy a House First or Sell My Current One First?
In an ideal world you’d sell your current property at exactly the same time as buying your next one. Unfortunately, this rarely happens in real world. Even though there certainly are people who could afford to pay two mortgages (at least for a while), majority of us would be a little worried about having to do so. Therefore, most of us have to choose either one option or the other. However, what to do first? Sell or buy?
In general, selling first will most likely put you under time pressure to buy another house in a really short time. You may end up settling for less than you want or overpaying for your new house or you might even have to look for a place to stay until you can find a new home.
If you decide to buy first, and then you can't sell your current house, there is a possibility of getting a bridge loan to cover owning both properties at the same time. However, it is not necessary to mention how financially demanding such situation can be.
The oldest school of thought says you should never commit to a new house before you sell the old one, especially if you have to use the equity from the old house to buy the new one. But this may not be right for you. Therefore, let’s have a look at some of the pros and cons of both these options.
Taking the equity of your current home, and then buying another one is considered the safest way to deal with the issue because you will know precisely how much money you have to work with. This will also allow you to look for a new house at your leisure, negotiate the best deal and find the best fit for you and your family.
Trouble is, if you’ve already sold your home you have chosen a moving date, and you could find yourself under time pressure to buy a property that does not meet your needs. One of the first things to do before you decide to sell your house is to devise a plan for temporary living quarters in case you have to
move before you find a new home. Also, don't forget that sometimes property prices might rise while you’re searching for your new home if we're in a seller's market.
Many people agree that this strategy makes more sense if you’re in a hot seller's market with bidding wars common over prime real estate. However, there are other factors that make people consider buying a house before selling the old one. One such thing is consistently rising home prices in Toronto’s real estate market. Buying a new property in a rising market means you can always get rid of your existing property at a potentially higher price down the road. However, if prices start to fall, buyers could end up trying to finance two homes which are steadily losing value.
There are also buyers with specific needs such as living on a specific street or walking distance to a specific service. Sometimes buyers fall in love with a property because of its uniqueness or attractive asking price. Yes, that's when emotions kick in and get in the way of you making a wise financial decision.
However, if you buy another property and are not able to sell your current home quickly enough, you could be faced with owning and making payments on two homes. Plus, you might have to come up with the cash for a down payment. Since you don’t know the selling price of your current home, purchasing a house could be quite a gamble. You may even be forced to take a lower price for your property so you can sell in time for closing.
There are many variables you have to consider when making such major financial decisions. Are we in a seller's market or buyer's market? How quickly can I sell my house? How can I make sure my closing dates coincide? Is there a possibility that I will be stuck with two houses? How much money can I count on from the sale of my house?
We Have 48 years of combined real estate experience to help you navigate successfully through the myriad of complexities that can arise when buying and selling real estate. We would be happy to meet with you to find customized solutions for your real estate needs.