Upgrading your home is an exciting time, but juggling the purchase of a new property and the sale of your existing home can be very stressful. It’s often hard to know whether to sell or buy first, as you will likely need the proceeds of the sale to fund your new home, but also somewhere to live throughout the process. Read on for expert advice to help you through this tricky time…
Advantages of buying first
Purchasing your new property before selling allows greater control over asset selection, but relies on having a strong financial position. It’s also a preferable option to buy first because you’re making decisions in your own time frame.
Buying first isn’t an option for most upgraders, but high-income earners with good equity are better equipped because securing finance for the new purchase is easier. For those without the means to hold two properties, bridging finance can cover the cost of the new purchase until the existing property is sold, although interest rates are slightly higher and finance is contingent on the sale. This added cost may pay off for some sellers.
If it’s a matter of bridging finance for a couple of weeks to secure an extra $50,000 on a sale price and avoid moving twice, that could be money very well spent. Buyers who rely on the sale of their home to fund the new purchase have less flexibility when buying first, increasing the pressure to sell by a firm date.
It’s also really important that you have your existing house ready to go. If you don’t sell, you can’t settle.
Why selling first is safe
Selling before buying reduces risk and provides the certainty of a set budget. It’s also less stressful as you’ll know your exactly what your finances are. Having funds ready for purchase is advantageous for decisive buyers, but the need to act fast can be a downside. You will have pressure to buy within a time frame, and that can lead to hasty decision making.
An extended settlement period for the sale of your existing property can also provide additional time to choose the right property and ideally should coincide with the settlement of the new home.
On the other hand, renting for a brief period after the sale can allow a more thorough decision-making process when buying. Although it requires moving twice and can add to stress levels, it can be useful when moving to a new area. Trying before you buy is a good way of validating your desire to live in that area.
Tips for getting it right
The key to success is managing both sides of the transaction at the same time, with as much focus placed on choosing an agent and pre-sale preparation as on asset selection. You do need to be doing those things simultaneously. Holding a property for rental income and selling at a later date is another option. Not a lot of people can afford to do that, but it’s a long-term play.
Local market knowledge is invaluable and can help upgraders decide which step to take first. You need to understand the attraction of your property and the actual area you’re selling in.
The key is to get property advice that has local knowledge and knows what’s going on in the market. Get in contact, we’re here to help you every step of the way. Click below to organise a chat.