- 11 Jul, 2017

Buying Before You Sell

Don’t lose sleep over whether you should buy before you sell. Instead, weigh up the facts. While buying before you sell is riskier. There are also many benefits. But, you have to determine if this option is best for you.

Financial Conditions

You need to be a risk taker to buy before you sell. Why? Well, because you’re taking a gamble that you’ll sell your first home sooner, rather than later. Plus, you’ll have to cope with more stress. Nevertheless, if you can handle this, then buying before you sell just may work for you.

Before you jump in you need to consider:

  • How you’ll cover two mortgages.
  • Your purchase costs.
  • What you can afford to spend.
  • Setting yourself a budget.

Market Settings

Being mindful of the buying and selling cycle helps you time when to buy and sell. This forethought allows you to get the best price. In addition, it can save you money in the long-run. You can do this by:

  • Conducting market research before deciding.
  • Looking at real estate data.
  • Determining whether it’s a buyer’s or seller’s market.
  • Watching home prices to see if they are rising.

The Pros and Cons

Financial advisers suggest that there are some benefits to consider when buying before selling. Of course, there are also downfalls. These are as follows:

Pros

  • Negotiating a conditional offer subject to sale of your property.
  • Removing any pressure to find a home.
  • Still having somewhere to live.
  • Waiting for a higher price on your property.

Cons

  • The financial stress of having bridging finance or a second mortgage.
  • You may not be able to sell as quickly as you’d like.
  • If you can’t sell you may need to consider renting the property to cover costs.
  • If you make a conditional offer, this may turn-off the vendor.

Exploring Your Finance Options

Sure, it’s easier to sell your existing home at the same time as buying. But, it doesn’t always work out this way. So, if you’re looking to buy before you sell, then it’s important to discuss your options with a lender. Finance options available to you include:

  • An existing home loan increase – If you have equity in your home, then you may be able to increase your existing loan to cover your new home. Then, you can pay off the balance after selling.
  • Bridging finance – A short-term loan of up to 12-months, bridging finance covers the deposit for your new property. Then you pay this off after your home sells. However, this finance option can be more expensive than others.
  • Deposit guarantee – Also known as a deposit bond, this option means you can secure a deposit for your new home. Which, in turn, enables you to secure your loan for your new property.
  • Self-funded deposit – If you have enough savings then you can take out a new home loan. You can then borrow the balance. This option gives you greater flexibility.

Which financing option is best?

It’s always important to consider your personal and financial circumstances, before making a finance decision. Although, by doing homework on loan features, conditions and structures you’ll avoid any pitfalls. For instance, some lenders require regular payments for new and existing debts. Though, other lenders may add the new debt’s interest payments to the next home’s loan balance. This option lessens payment until your first home sells.

Whichever option you select, it needs to suit you. Plus, it needs to let you get on with life without putting you under unnecessary pressure.

Do you want to buy before you sell? Then contact eChoice. We can help you understand your financing options. Plus, our brokers have access to 100s of products, so we’ll find you a competitive mortgage.


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