Should I Sell Before Buying a Next Home or Buy First?
When you’ve made the decision to move homes, whether it’s for more space, change of jobs or to use your equity, the thought of buying your next property can be exciting, and stressful. When you are upgrading your home, the first question you need to answer is will you buy a new home first or sell your current property first, then buy?
Should you sell before you buy your next home? Let us take the stress out of it by helping you weigh up your options! Here’s our guide to help you figure out which strategy is best for you.
Start with the Market
Real estate markets feel like they are always changing. They can differ so much between states and even suburbs, so talking to a real estate agent in the area you are looking at will play a big part in answering the buy or sell first question.
Typically, in a seller’s market, like we are in at the moment, buying first could be the way to go for you. Your current home is likely to sell quickly if there are more buyers than there are houses for sale.
When we are in a buyer’s market, with more homes for sale than buyers, houses can stay on the market for much longer, so it can be a sensible approach to sell your current home first. If you were in a situation where you couldn’t sell your home, you could be left juggling two home loans or paying bridging finance for longer than you anticipated. Both those scenarios can be costly!
A third scenario is possible you need to know about, too. If you are buying in one type of market and selling in the opposite, it is important to do your research on which approach will suit you best.
Is it better to sell or buy a house first? Let’s dive into the pros and cons of each strategy to help you work out which is best for you.
Selling Your First Home to Buy Your Second
Selling your current home first is, generally, considered to be the less risky approach, but there are a number of reasons it can be less convenient. Check out the below given pros and cons of selling your house before buying second:
The Pros – Selling Before Buying
- By selling first, you will know exactly how much money you will have to spend on your new home, and that means you’ll know how much you need to borrow.
- It can save you the stress and cost of paying two home loans at once, or paying for bridging finance. If your current property doesn’t sell quickly, this financial pressure can lead many sellers to accepting a lower offer to finalise a deal and move on.
- If you negotiate a longer settlement (90 days for example), you can give yourself time to look for your dream property. Sometimes, buyers and sellers can negotiate for extended settlement periods of up to six months or more. If that would suit you, you can always ask the question because the buyer could be in the same position as you.
The Cons – Selling Before Buying
- When settlement day arrives on your sold property, you may find yourself needing to rent and handle the cost and inconvenience of moving twice. If you haven’t found, or moved into, your next home you will need to have an option to stay while looking for your new home. Some people have family or friends to stay with, or can afford to put furniture in storage and live in a hotel, but you need to examine your personal situation so you are prepared for all options when you decide to sell first.
- If property prices are rising and there is a large gap between selling your current home and buying your next, you risk being priced out of properties in your ideal location. If you’ve got your wishlist of property features, or looking for something very specific, a rising market could make you feel pressured to buy something that isn’t quite right for you.
Buying Second Home Before Selling First
This is potentially a riskier strategy to choose, however, it offers some advantages, especially in a seller’s market. Check out the below given pros and cons of buying a house before selling first:
The pros – Buying Before Selling
- For many home upgraders, finding their perfect home by accident is the reason they decide to move in the first place. If this is you, buying first can make sense because it may be the only way to secure that special property.
- If you buy first, you can usually expect to settle on your new home first and move in, which can remove the hassle of having to rent or finding another option to stay while looking for your next home to buy.
- Whether house prices are rising quickly, you could lock in your next home at the best possible price and then let the market upswing and continue adding value to your current home for those higher offers.
The Cons – Buying Before Selling
- If you buy first and overestimate the selling price you may receive for your current home, you can find yourself in a difficult financial situation when trying to settle on your first home.
- When you have a mortgage on your current home, it can be a risk to juggle two loans. Another option is to take out bridging finance or a deposit bond to be able to buy before you have the funds from your sale. All these options can be costly, so it’s important to speak to an experienced broker to find out what you can afford.
- If you buy first in a buyer’s market or when prices are dropping, it could take longer to sell your home than you anticipated. This can put pressure on you to sell your current home for far less than you would have otherwise accepted.
How do you know if it’s best to buy a house first or sell first? Talk to us!
North Brisbane Home Loans is specialist in all facets of financing your next home. We can help you assess how much equity you have and give you an estimate of your current property. Our expert mortgage brokers can also help you find out how much money you can borrow for your next home. Knowing these answers will get you closer to choosing which strategy is best for you.
Once you know what you’d like to do, we can help you with loan pre-approval and the whole finance process to take the stress out of upgrading.
Contact us today and let us help you get into your next home quicker.