Buy first then sell, or sell first then buy?

Buy first then sell, or sell first then buy?

Most homeowners will make the switch from one property to another at some stage in their lives, whether it’s upgrading to a bigger property, downsizing for retirement, or a change in financial situation.

Buying and selling your home at the same time is a balancing act. On the one hand, you want to get the highest price possible on your current house, which requires patience and is often a waiting game. On the other hand, buying a house before you’ve sold your existing one means you may end up having to pay interest on two loans and tie up all of your home equity.

So is it better to buy a new property first then sell your existing one, or sell first and then buy? We weigh up the pros and cons for both to help you decide which one is right for you.

Selling first:

Pros:

• You’ll have more predictable costs. If you sell your existing home first, you’ll know exactly how much money you have to spend on your next property. For example, you may end up selling your home for more than you expected and have additional money to renovate your next home, or your property may have sold for less than you expected.
• You won’t be paying off two mortgages. In an ideal world, you’d have no overlap between selling your current house and buying a new one. The reality is that your settlement times may cross over — and as a result, you might end up having to pay interest on two mortgages. While this may be okay if you’re in a financially stable situation, these costs can quickly add up over time.

Cons:

• You have to find temporary accommodation. If you sell your property first, you may need to find an alternative place to stay while you’re looking for your next home. This could mean spending extra money to rent short-term accommodation, staying with family and friends, or even living in a hotel. Keep in mind that you may also need to move your things twice or store them until you purchase a new property.
• The property that you are looking at buying may have also increased in value. Remember: the rising tide lifts all boats. If you’re able to sell your property at a high point then chances are you will also be paying a higher price for your next purchase. 

Buying first:

Pros:

• You can move in straight away. If you buy a new property before selling your existing one, you won’t need to worry about finding temporary accommodation while you’re between homes. This is the ideal situation if you have a large family, or an owner who is elderly.
• You can jump on your dream home. Your dream home could be advertised on the market at any moment, just when you least expect it. Purchasing a new property before selling your old one allows you to take advantage of any great properties on the market, without the need to find a buyer for your current home.

Cons:

• You may have to hold multiple loans: Some lenders may offer a bridging loan facility which helps buyers to transition from the existing property to the new place. This means you will be holding onto 2 loans while you sell your property.
• It can be stressful. If finances are already tight, the added pressure of having to find a buyer for your home can quickly add up — particularly if you’re paying off two mortgages and running costs.
• You may be paying more interest in the short term by holding onto 2 loans which is the cost of having the flexibility with selling your existing property at a later stage.
• It can take longer than expected. It’s tricky to predict how long it will take for your current house to sell on the market, and you may find yourself feeling anxious as days or weeks go by without an offer. Over time, this may even cause you to sell your existing property for a lower price than you anticipated.

Should you buy first then sell, or sell first then buy?

Ultimately, the decision on which step to take first will come down to your financial situation, the property market, and your reason for upsizing or downsizing.

If you are struggling with your existing mortgage repayments and need to downsize, it may be wise to sell your current home first before purchasing another property. However, if you have plenty of equity or can afford to service two loans at once, it may be more beneficial to wait.

It’s important to seek advice before making the final decision. A financial advisor or mortgage broker can help you work out the best option for your individual circumstances and financial situation.

Buying a new home? It’s time to revisit your home loan

Regardless of whether you buy first then sell, or sell first then buy, you should revisit your home loan to ensure you’re still getting the best deal on your next property purchase. Speak to the brokers at Rateseeker today, and we’ll help you seek the sharpest rate for your mortgage.