Whether to sell your current home before buying a new one or vice versa is a common dilemma. As with most dilemmas, no right answer exists. Both options have pros and cons. The trick is to determine which option has the most pros in your individual situation and will create the least amount of stress for you.

Let’s look at the issues relevant to each option.

Sell then buy

• If you sell your existing home before buying a new one, you may feel pressure to buy another home before yours settles, even though it’s not perfect.

• You have the upper hand, as you have no urgency to sell. That makes it easier to hold out for a high price for your home.

• You won’t need bridging finance.

• You will know how much you have to spend on a new home.

• You can arrange for an extended settlement to give yourself time to find a new home without rushing.

• If, by the time your existing home settles, you have not found the perfect new home, you will have to move twice. Even if you can stay with friends or family temporarily, you may need to pay for storage for your contents.

• If it takes you a long time to find your perfect new home, property prices could increase in the intervening period, limiting your choices.

Buy then sell

• You can take as long as you need to find your perfect new home.

• You only need to move once.

• You won’t know exactly how much your existing home will sell for, which will make it harder to know how much you have to spend on your new home.

• You may have to accept a lower price than you wanted for your existing home so you can sell it in time for settlement on your new home.

• If your existing property is slow to sell, you may need bridging finance to cover the mortgages on both properties until it does.

Bridging finance                   

If you buy your new home first, you may need a bridging loan to cover the period that you own both properties. Bridging loans can simplify matters and reduce stress, but they can also be expensive, depending on your lender and prevailing interest rates. Like other home loans, bridging loans are offered with fixed or variable rates. However, they are usually offered only for a short term of 6 to 12 months.

Depending how your lender views the risks of your financial situation, you may pay a marginally higher interest rate on a bridging loan. On the plus side, you can save thousands of dollars on lender’s mortgage insurance if you borrow less than 80% of the combined value of both properties.

Planning reduces uncertainty

The reality is that you may receive a lower price for your home than your real estate agent initially estimated. It’s a good idea to consult a financial adviser to help you run through the numbers for each of the likely scenarios and to help you to set your budget for buying a new home.

Remember that there are a range of fees and charges associated with both buying and selling property. These can be substantial, so discuss them with your conveyancer, make sure you budget for them and keep track of your spending as you go.

In an ideal situation, you could align the settlement dates on both the property you are buying and the one you are selling, with the help of a 60- or 90-day settlement period on the transaction initiated first. Should they not align, consider enquiring with the buyer about a leaseback option. This can provide breathing space and remove the need to move twice.

Help is at hand

The timing of buying and selling property can be tricky. Investigating and thinking through all the options beforehand will help to reduce the stress involved. It should also ensure that you do not find yourself in a position where you are forced to buy or sell before you are ready.

Your local real estate agent, conveyancer, mortgage broker and financial adviser all have valuable experience to help you with your decision making, which they will be only to pleased to share with you.

Whether you decide to buy then sell or sell then buy, Conveyancing Matters will ensure that your property transactions, including settlements, are accurate, secure, efficient and timely. We’ll smooth the way for you to be settled and relaxing in your wonderful new home just as soon as possible.