Should I buy a new home before selling my own?
SOME homeowners enjoy holding on to their ability to live in their current home until they find a better alternative. Others don’t want to make a financial commitment to a new home until their current home is sold or under contract.
This is according to Elaine Chetty, licensee of Seeff Richards Bay, who says factors like whether a homeowner is moving locally versus to another province or country, whether or not he or she has children in a particular school, and the homeowner’s deposit play a crucial role in this decision.
Are you not sure whether you should buy another home before you sell your current one, or sell your current home first?
Chetty shares the advantages of both options so you can make the choice that is right for you:
Advantages of selling your home first
The most obvious advantage to selling your current home first is that you’ll cash out the equity in your current property. You can then use this money as the deposit on your next home. This is one of the most common reasons for selling first, says Chetty.
No contingency (subject to offer)
Many agents will write offers with a ‘subject to home sale’ clause, meaning the offer is contingent upon the buyer selling their current home within an allotted timeframe in order to free up the deposit.
Chetty says if you can avoid writing this contingency by selling first, you’ll make a stronger offer, which could be a trump card in a competitive market.
In other words, selling first might help you to land your dream home before someone else has a chance to snatch it up.
Predictable home loan payments
By selling first you remove the possibility of needing to make two home loan payments simultaneously.
In fact, if you’re able to live with friends or family during the short-term gap between selling and buying, you may be able to pocket a few months’ worth of home loan payments too. This can help you to build up cash reserves to cover various moving and other expenses, she says.
If the idea of selling and buying simultaneously is overwhelming, you may find peace of mind in focusing on one step at a time.
Chetty says by selling first, you can concentrate on improving and staging your property to make it show-ready, and stay in your home while you patiently wait for the best offer.
Advantages of buying a new home before selling your old home
You only move once
If you sell your home first, you’ll need to move twice: first to temporary accommodation and later into your new home. This doubles the hassle and results in the process dragging out longer.
In contrast, buying first ensures that you’ll only need to move your belongings once, and you won’t need to bother finding a storage unit or a month-to-month rental, she says.
If you buy first, you give yourself ample time to shop around for a home you love. You won’t feel pressured to close on another home quickly just because your short-term lease is about to expire, you’re tired of staying on your sister’s couch, or the school year is about to start.
Chetty says if you’re in a competitive housing market in which you might need to make offers on multiple properties, enjoying the luxury of time can be particularly valuable.
As can be seen, both options hold distinct advantages and disadvantages. The bottom line is that there is no ‘best’ answer to this question, each option includes trade-offs and your personal circumstances and preferences will be the deciding factors, she says.