Don’t lose sleep over whether you should buy a property before you sell your existing home. Instead, weigh-up the facts in comparison to your situation, and then make the right choice for you. Just remember that while buying before you sell is riskier, there are also many benefits. Let’s look at 5 factors that will help you decide if buying before you sell is right for you.
Assess Financial Conditions
You need to be a risk taker to buy before you sell, and you’ll have to cope with greater financial stress. Nevertheless, if you can handle these aspects, then buying before you sell just may work for you.
Before you jump in you need to consider:
- How you’ll cover two mortgages – Work out your costs so that you know exactly how much your repayments will be. Then consider your other expenses and add these up. Next, look at your income, and decide if you can afford to pay for two homes while waiting for one to sell.
- Your purchase costs – Know exactly how much your new home will set you back. Make sure you include stamp duty, the mortgage title transfer fee and conveyancing fees.
- Setting yourself a budget – If the cost of covering two mortgages is tight, then look at how you can achieve this by reducing your luxuries. By cutting other unnecessary expenses from your budget, such as eating out, you’ll free-up additional cash flow.
- Having a contingency plan – If your home doesn’t sell in a specified time, then consider renting the property out to cover the mortgage. Remember all you need to do is cover your cost.
Consider Market Settings
Being mindful of the buying and selling cycle helps you time when to buy and sell. This forethought allows you to get a competitive price. Also, it could save you money in the long-run. You can do this by:
- Conducting market research before deciding – Jump online and look at sales data. Consider property type, size, and location. Look at sales data that’s no older than 12-months and find a property that’s similar to yours. Then review sales prices.
- Determining whether it’s a buyer’s or seller’s market – A buyer’s market occurs when there is more than 6-months’ worth of supply on the market. A seller’s market, on the other hand, is when there is less than 6-months’ supply on the market.
Unlock your suburb's demographic profile
Looking to buy in Ultimo, NSW 2007.
This information is a guide only and is an estimate only based on the past 12 months of aggregated online mortgage enquiries from eChoice and partner programs.
Speak to a home loan specialist today
Submitting your enquiry
An eChoice home loan expert will be in touch soon.
Look at Pros and Cons
Financial advisers suggest that there are some benefits to consider when buying before you sell. Of course, there are also downfalls. These are as follows:
- Negotiating a conditional offer – In some Australian states, you can, as part of your contract of sale, put ‘subject to sale of existing home’ in the buying conditions. If the vendor accepts this, then they are willing to wait for you to sell your home before settlement within a specified date.
- Removing any pressure to find a home – By buying before you sell, you can research the market at your leisure and wait until the right property becomes available. This scenario removes any buying pressure.
- Waiting for a higher price on your property – If you’ve had offers on your property below your asking price, then you can wait for higher prices. This tactic gives you the opportunity to get the price you want.
- Greater financial stress – Paying two mortgages can be tricky. So, you’ll need sound money management skills.
- Playing the waiting game – You may not be able to sell as quickly as you’d like. So, you may need to be patient.
- Considering a rental – If you can’t sell, you may need to consider renting the property to cover costs.
Explore 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 the 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 choice gives you greater flexibility.
Find the Right Financing Option
It’s always important to consider your personal and financial circumstances, before making any financial decision. Always look at loan features, conditions, and structures critically and then analyze costs so you’ll avoid any pitfalls. For instance, some lenders need regular payments for new and existing debts. Other lenders, however, may add the new debt’s interest payments to the next home’s loan balance. This possibility 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.