Buy or Sell a House First? What’s Better?
If you’re planning to move houses, you’ll be hit with a big decision. Should you sell first, or wait until you’re purchased something new?
As with most difficult choices, there is no simple solution. Interest rates, housing market conditions, financial readiness, and your unique situation, are all factors in making the right decision for you.
The real estate market
Supply and demand. If lots of properties are available, it’s easier to buy and harder to sell. This is rarely the case in Australia these days, so buying can often take longer than expected. On the other hand, a well-presented property will likely be snapped up pretty quickly.
This suggests that – at the moment at least – it might be safer to wait until you’ve purchased a new place before selling. But there are other things to consider.
Your financial situation
Whether you decide to buy or sell first is heavily influenced by your financial situation. Selling your current home before purchasing a new one may provide you with a sizeable down payment, which makes financing your new property easier. You also know exactly how much you have to spend.
However, this strategy may also result in a period of time between places to live. It’s difficult to get temporary housing. Living with your parents or friends is not always feasible or desired, short-term rentals are scarce, and Airbnbs are pricey. Additionally, you may have to pay extra for furniture storage.
Purchasing first can remove the burden of moving twice, but it also increases the possibility that you will have to pay two mortgages (along with interest, utilities, and insurance) until your previous house sells and settles.
Selling first: Benefits and drawbacks
Pros
Financial certainty: You can minimise the risk of overcommitting because you know exactly how much you must spend on the next home.
Better negotiating position: You can be flexible with settlement times and will not have any restrictions on any offers you make.
Simpler loan applications: Lenders find you more appealing if you have money in the bank. You might be able to avoid costly bridging finance and obtain better loan offers when purchasing a new place.
Less stress: You don’t need to worry about hitting a target sale price so that you can actually afford your new property.
Cons
Risk of finding temporary housing: If there is a lag between selling your old property and purchasing a new one, you may need to rent or find temporary accommodation, which could result in extra expenses and the inconvenience of having to move twice.
Market shifts: While you are looking for a new property, real estate values may increase, which could increase the cost of your next purchase.
Pressure to buy: If you are looking for a new property for a long time, a sense of urgency may cause you to make snap decisions and buy in a panic.
More stress: It might be unnerving to sell your house without a clear plan for where you will live next.
Buying first: Benefits and drawbacks
Pros
Buy the property of your dreams: Don’t feel pressured to sell your current property right away. Instead, take your time finding your ideal home. In a competitive market, this gives you more time to land a great place.
Capital gain: Purchasing first and selling later could result in your old home’s value increasing if real estate prices are growing.
Convenience boost: Save yourself the trouble of moving twice or putting things in storage while you wait to buy.
Cons
Financial risk: You can experience financial difficulty and even require bridging finance if the sale of your present house takes longer than anticipated or sells for less than you hoped.
Double mortgage payments: It is possible that you will have to handle two mortgage payments at once. Not the best!
Pressure to sell: You may experience pressure to sell your present home as soon as possible, potentially at a reduced price.
Talk to a mortgage expert
With so much to think about, it makes sense to get in touch with one of Mortgage Broker Sydney’s home loan specialists.
We can help you organise your finances, offer guidance on changes in the market in different Sydney suburbs, and assist you in choosing the best loan for your needs.
We can even get you historical reports of properties you’re interested in, showing past sale results and other details.
It makes sense for certain people to buy first, although we usually suggest that people sell first so they know their future purchasing power. But there’s no one-size-fits-all rule.
For additional information, get in touch with Michael, Wendy and the Mortgage Broker Sydney team.
You’ll always get our services for free. Of course, if you do end up getting a home loan, your lender will charge you their regular fees.
Contact Mortgage Broker Sydney today.
Michael began his career in the finance industry over 35 years ago. He progressed through the ranks at the CBA in both retail and corporate lending, culminating in a senior position as a Corporate Relationship Executive. His decision to leave the bank in 2003 to become an independent mortgage broker was driven by his desire to assist everyday customers break through the jargon of the banking world and access the best loan products in the market. His experience is wide-ranging from helping first time buyers to large commercial enterprises. What Michael doesn’t know about home loans, simply isn’t worth knowing!