Thinking of buying a new home before selling your current house?
A lot of homeowners choose to sell their current home before buying a new one, especially as trying to buy and sell at the same time is a huge endeavour and it can be stressful because the process often takes longer than expected.
But what about buying first and selling second?
When making the decision to buy or sell first, there are a few key factors to consider.
If the property market is strong then buying first is less risky, as there's a greater chance of being able to sell your old property quickly. However, if the property market softens before you have sold your old property you may end up worse off financially as there are fewer potential buyers.
For example, if you get an optimistic valuation of your current property you may over-extend yourself when buying a new house or find it difficult to balance two mortgages for an extended period of time if it takes longer to sell than originally anticipated.
If you are considering buying a new home first, it's important to get an accurate property valuation and take into account any changes in the housing market that could affect the purchase price.
Generally, buying a new home first is seen as a riskier strategy as it relies on you being in a strong financial position. As discussed above, it may take longer to sell your old home than expected which can result in additional costs, repayments, and fees.
Another disadvantage of this approach is that you may feel pressure to sell your existing home as quickly as possible and may end up with a lower sale price.
One way to mitigate this is to negotiate an extended settlement period on the purchased property. This can give you some flexibility while you are still in the process of selling your old home.
Lastly, it's important to understand how much borrowing power you have when looking at buying your next home. If you're still paying a mortgage on an existing property, it can reduce the amount you're able to borrow.
On the other hand, if you have significant amount of equity built up in your current home, this can help to secure funds to purchase your next property as well as make a strong offer.
Selling your current house before buying is the least risky choice because you know how much money you have to work with, ensuring you’re not going to overspend on your new house. Plus, you have the deposit money ready.
It’s also easier to apply for a new home loan since you won’t have two mortgage payments to make at the same time.
However, selling first will force you to rent a unit, stay in a hotel, or live with your extended family until you have purchased a new home. You also need to put your furniture in storage which can be quite costly, especially if it takes a long time before you find a new property.
When making your decision, be sure to include any additional cost to your calculations.
Whichever path you choose, it’s important that you do your research first, evaluate your options, and your current financial situation to minimise the stress of buying and selling your house.
As always, seek professional advice to help you make an informed decision.
Ready to buy your next home? Talk to one of our lending specialists today to start your application or simply apply for a home loan online.
Tags: buying a second home | buying a second property