How to solve the dilemma of being stuck with two houses at once? This is the mystery when selling your existing home because you have to move and re-buy. Real estate agents are often asked this question: shall I buy first or sell first? Nobody wants to answer that question, as there is no correct answer. Or maybe there is, but no-one wants to hear it.
So here it is.
It is better for a seller to sell the property before buying a new home and then go into rented accommodation while looking. Ugh! There – it’s out there now.
Of course, this is only one viewpoint, so let’s look at the pros and cons.
With anything in life, you must look at the worst scenario before you make a decision. You cannot risk losing your house simply because you cannot bear to have your life disjointed for a month or two. If you think it has been difficult at times to make the payments on your home, how will it be to make two payments on two houses every month?
If you are in a position where you know you can afford to make two mortgage payments, maybe you could ignore this advice. However, it can be very difficult to be cleared for two loans at once, even if you think you can afford it, so get pre-approved for two loans before you act. If you do move out, try and leave some furnishings in the home, to help it look ‘lived in’.
There is a sneaky way around this – that is by pretending that you are renting out your existing home. This shows you have a (falsely) higher income than you really have. Don’t let an unscrupulous broker talk you into this scenario. Apart from the fact that it is a federal crime, you could still lose your home anyway.
In these types of situations where a bridging loan is requested and approved, the original home (#1) is still on the market, waiting for a buyer. Meanwhile you move into the new home (#2) and start paying two mortgages.
Suppose that the market is slow and there are no buyers for house #1? After three months you are still paying two mortgages and then the market plunges. You have to drop the price of house #1 considerably, meantime house #2 has also dropped from the price you just paid for it, and on top of all this you are paying two huge mortgages.
Three months have passed and no sign of a buyer; would those three months have been better or worse for you if you had been living in rental accommodation? Once you have answered that question, you know the answer that will suit your lifestyle.
It’s not all bad; there are some advantages to selling first and buying later. Obviously, by vacating your home at a date that specifically suits someone else, it is an added incentive to a buyer to choose your home.
Once your home is sold and you decide to buy, you will be in a better position to offer a lower price if you are not involved in a chain. How about this one: after living in rented accommodation, you will REALLY appreciate your new home?