Are you thinking about selling your current property and moving somewhere better suited for your lifestyle? Maybe you are looking to downsize from your family home after becoming an empty nester. Maybe you are looking to move closer to the suburbs to be closer to family or your favourite activities.
Whatever the reason may be, if you are looking to sell your property, you are faced with the question: Should I buy a new home before selling my current one?
There are many factors to consider with this question than what may meet the eye. Read on as we go through the pros and cons of buying before selling and what factors to consider when deciding the best move for you and your family.
Possible Outcomes of Buying Before Selling
If you find your dream home, of course, you don’t want to let it slip through your fingers.
This may mean purchasing a new home before selling your old one. You will have the benefit of having more time to prepare for your move. Rather than packing up in a hurry and rushing into your new place, you can take your time and possibly use it as an opportunity to spring clean before you move.
It’s important to consider though that you may not be able to guarantee a quick sale of your current home. You may be managing the mortgage and property of the previous home longer than you anticipate, which can be a strain on your time and budget.
One way of avoid the potential of managing two properties is if you consider choosing to buy an off-plan property that has yet to be built before selling your current property. The reason people do so is primarily related to timing. That is, they want to secure a property today at todays price, knowing they will be in a position to relocate and move to the new property at a particular point in time in the future.
Another positive if you buy a property off the plan, depending on the time you buy, you may be able to secure a higher price for your current property and then be able to sell it for more in the future when your new place is completed. Some people use this time to undertake minor renovations to their current property which will potentially add more value when it comes time to sell.
Possible Outcomes of Selling Before Buying
When you sell your home before buying a new one, you get cash in your hands almost immediately. This way, you know the exact budget you have for your new place. You are able to have a clear picture of the price range you are looking for and can be confident in negotiating beneficial terms for your new purchase.
While having access to cash right away is great, you may end up getting a quicker sale than you anticipate. This means you may have to move out of your home before you find a new property. If this happens, you may find yourself looking for a place to rent, which can become costly. If the housing market is more competitive when you are searching for a new home, you run the risk of staying in a place that is not ideal for your lifestyle for longer.
Other Factors to Consider
Reviewing the pros and cons of each scenario is crucial to deciding what is best for you and your loved ones. There are also a few other factors that can impact your decision, such as:
The Current Housing Market
You may have heard the term Buyer’s vs. Seller’s market when referring to the housing market, but what does it mean? A buyer’s market is when the supply exceeds the demand, meaning there are more houses to sell than there are home buyers. In this scenario, prices may be lower, and buyers have more choices to find a home and a price that works for them. If the current market is in the buyer’s favour, you may be more influenced to purchase a new home before selling.
On the other hand, a seller’s market occurs when there are more home buyers than there are homes to buy. This makes the market very competitive, and people are more likely to sell their homes at a higher price. If the current market favours the seller, it may be appealing to sell your home before buying a new one.
The Impact on Finances
If you buy before selling, you could be temporarily managing two mortgages at once. This can put an immediate strain on your budget and requires you to be strategic with your finances. This choice may also impact your overall budget for months and years into the future. It’s important to understand the impact this could have on your finances before making this decision.
If you’re buying off the plan, you may not need to manage two mortgages, however, you will still need to think about how you manage the deposit.
When deciding to buy or sell first, a deposit bond can widen your options and lessen the financial strain that occurs between buying and selling. This sounds appealing, but what is a deposit bond?
A deposit bond, simply put, is a promise to a seller of a property that they will be paid the deposit amount in the event the buyer does not complete on the property purchase. A deposit bond is used in place of a cash deposit until the sale is complete. At completion, the buyer must pay the full purchase price as they have not paid a cash deposit when they committed to buy the property. In that sense, the deposit bond delays the need for the buyer to pay the deposit until completion of the property purchase.
A deposit bond saves you using cash between selling and buying before you have to pay at settlement. This way, you can allocate your funds elsewhere while securing the property. Deposit bonds are a guarantee to the seller from an insurance company or a financial institution of the deposit amount in the event the buyer defaults on the property purchase and can be acquired with a small fee.
Key Takeaways
Buying an off-plan property before selling your current home can save you the hassle of managing two properties and potentially mean you purchase when prices are lower and sell when prices are higher.
Buying a home before selling your old one can give you more time to move, but it may tighten your budget if you have to pay for two mortgages.
Selling your home before buying a new one can give you a clear idea of what you can afford, but it may put you in an inconvenient living situation if you sell your home and you don’t have a new one to move to.
The current housing market can impact your decision – if it is a buyer’s market, you may want to buy before selling. If it is a seller’s market, you may want to sell your home before buying a new one.
A deposit bond can be used in place of a 10% cash deposit for a new home, giving you more financial freedom between selling and buying.
There are no right or wrong answers when deciding if you should buy a new home before selling your current home. It is important to consider each factor that will impact you, your loved ones, your unique living situation, and your finances.
Whether you are downsizing, buying your first home, or investing, we have deposit bond options for you. Contact us today to learn more about how a deposit bond could be used in your situation.
