As a current homeowner, you might be planning you next move to a new home. You are now stuck with the dilemma of whether to buy or sell your existing home first. You could try to buy a home with a condition that says the purchase is subject to the sale of your existing home but in most markets that will give you a huge disadvantage when competing with other buyers.
Truth be told, there are rewards and drawbacks with either choice. It is in your best interest to keep the following in mind to explore what might be the best move for you.
1. Consult your Realtor about your options
An experienced, trusted, and knowledgeable Realtor can provide a realistic value expectation of your present home and give an overview of options such as porting a mortgage, bridge financing, and a conditional offer. Essentially, your Realtor can set the strategy with the terms and conditions in your listing and purchase contract. Also, your Realtor can negotiate possession dates to prevent you from being homeless in between homes or stuck with two homes and becoming a reluctant landlord.
2. Value of your current home - know your budget
Obtain a realistic value of your present home through provided by your Realtor or an independent appraiser. Keep in mind to include selling costs such as mortgage penalties, lawyer fees, and real estate commission. This information will help you estimate the amount of equity remaining after your present home sells.
3. Be realistic about your financial capabilities
Once you know how much equity you will have, check with your lender to determine your options regarding your current mortgage and to find out if bridge financing is a possibility. This allows you to take possession of your new home before the funds for your existing home are received by your lender. Find out how much this will cost you based on the interest rate and any fees included. If financing is not, you may have to sell your current home and make temporary living arrangements until you get the perfect new home.
4. Keep all of your properties
It may be an option to keep your present home as an investment property. Your bank will consider the monthly rental income to qualify you. Just take into consideration all the things that come with being a landlord, such as property management, vacancy, property upkeep, and taxes to name a few.
In the end, your decision will most likely be based on a number of factors, but knowing the potential upsides and drawbacks are important before you make your next move.