It’s a nightmare scenario for most homeowners: buying a home and then being unable to sell your old one.
Realtor® Chris Lodge says buying before selling “can cause a lot of financial stress and can be a risky business unless you have a serious income.”
The good news is, there are ways to make it work, and other options to consider.
Here are five questions to ask yourself before making a decision:
1) Will the lender allow me to buy before I sell?
Talk to your mortgage broker or bank to find out whether buying first is an option for you. In some cases, you may not be approved for a mortgage on a new home until you’ve sold.
Chris says, “If you do decide to buy before you sell, one option is bridge financing. Bridge loans allow you to combine payments of the old house and the new home, making it possible for you to transition from one residence to the other. However, the catch with bridge loans is that you need to have considerable income and excellent credit.”
2) Am I willing to make the sale of my home a condition of an offer?
Some people remove the risk of buying first by putting an additional condition in their offer; that they will only buy the property if the sale of their home goes through before closing.
Your offer is now less attractive to sellers as it puts them in a risky situation, and you may end up losing the home you want to buy if your home doesn’t sell in time.
3) How quickly are similar homes selling in my area?
This is a very important question to ask your Realtor® if you’re thinking of buying first. Although your Realtor® cannot guarantee that your home will sell within a certain timeframe, they do have the most up to date information about market trends, and can give you an idea of what to expect when you sell.
4) Am I willing to rent or live with family temporarily if I sell my home first?
The alternative is to sell your home before you buy, which means finding a temporary place to live. Are you comfortable with moving your family and belongings twice, and finding a short term place to stay?
5) Do I have a backup plan if I am struggling to pay two mortgages?
It’s impossible to predict exactly how long the selling process will take, so it’s important to have a plan if you end up with two mortgages for longer than anticipated.
Chris says, “If you have the finances you may see the potential benefits of carrying both houses; the old one with renters paying the mortgage and you in the new one. I think the biggest thing is knowing that if need be you can make the mortgage payments on both properties for several months.”
If renting out your current property is part of your buying and selling plan, get some more information about the rental market in your area.
Chris Lodge or any of our other expert Realtors® would be delighted to discuss your particular situation with you, so give us a call if you’re buying and selling in Prince George, BC or surrounding areas (250-563-1000).