If buying a new house has been on your mind, now might be the time to make a move. But before you call your real estate agent, keep reading to discover important considerations to keep in mind before submitting that offer on a new home.
Or, maybe you’re not too sure if you should buy a new home before selling your current one. This article will give you the pros and cons of buying a new house. So make sure to read on before putting your current home on the MLS.
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- The pros of buying a new house before selling your current property
- Consider necessary renovations when buying a new house
- Porting your mortgage on your new home
- The cons of buying a new house before selling
- Renovating your current home may be cheaper than buying a new house
- The takewaway
- Frequently asked questions about buying a new house
The pros of buying a new house before selling your current property
There are definite benefits to buying a new house first and selling second. For example, if you are buying a new house first, you don’t need to live between two homes at once.
Or conversely, you could see living between two homes as a benefit because you can slowly move your things to the new residence. Many people find this is a less stressful way to move. In comparison, completing the move in a single day on a strict deadline can be very tedious.
The challenge with maintaining two residences is that you’d have to carry two mortgages at the same time. This is called “bridging” your mortgage. Your lender may request a fee for the amount of time you’ll be carrying both mortgages.
You may want to avoid the additional fees associated with bridging your current mortgage. In that case, you can instead opt to make a firm offer with a closing date very close to or on the same day as the closing date of your new property.
Or, when submitting an offer, you can make your offer conditional upon the sale of your property. This is to ensure you can arrange a beneficial closing before firming up the purchase of your new property.
Consider necessary renovations when buying a new house
Another benefit to buying a house before selling is that you can complete renovations at the new property before moving. This can be important when you’re renovating a part of the home that makes it uninhabitable for a time.
For example, extending exterior walls to add more living space, renovating the main bathroom with a shower or completely replacing the kitchen. These renovations aren’t easy to live with.
If your budget allows you to bridge your mortgage long enough between closings, it may be better to complete any necessary improvements before you move in.
Buying a new house before selling your existing property is a great idea. Especially if you need more time to prepare your current home for sale.
Maybe you need to paint, update the landscaping or have the roof replaced. Taking the time to complete these steps will help get you the most money for the sale of your home.
Another pro of buying a new house first before selling your current home? You’ll also have more time to properly plan your move.
You can take the proper steps when interviewing and hiring the moving company best suited to your needs. Don’t rush this process and hire the first person you Google! You want to ensure you find movers that have great reviews from past clients.
Porting your mortgage on your new home
Everyone’s financial situation and current mortgage arrangement is unique. You should first ask your mortgage lende if you can port your mortgage to your new home. Porting your mortgage simply means transferring your mortgage from your current home to your new property.
But be careful before buying a new house! Not all mortgages can be ported to a new home.
The mortgages that can be ported usually have a time limit of 90 days. So you have to port the mortgage to the new property within this time. Check with your mortgage professional to be sure.
If porting your mortgage is not an option, you may be required by your lender to terminate your current mortgage and apply for a new mortgage instead of transferring.
This can lead to seriously expensive early termination fees if you have a long time left on your mortgage term. Be sure to first check with your mortgage specialist to determine the best way to proceed when buying a new house.
If you’re curious about potential fees to pay out your current mortgage, check out your lender’s website. Banks and other lenders will often provide a mortgage calculator you can use to assess any potential prepayment fees required to break the mortgage.
These fees are based on the remaining term of the loan. As always, connecting with your mortgage agent is the best way to assess potential penalties when looking into paying out and terminating your current mortgage.
The cons of buying a new house before selling
There are many benefits to buying a new house before listing your current home for sale. However, there are also some important cons to consider.
For example, until you sell your current home, you can only estimate how much money it will actually sell for. Up until that point, you’ll only be working with an approximate sale price estimate given to you by your real estate agent.
This can be scary when you’re going up against multiple bids on your next potential home. Knowing exactly how much money you’ll have in your pocket when you sell can be very beneficial and may allow you to push your budget enough to secure the home of your dreams.
If porting isn’t an option, it’s also important to note that it’s significantly easier to secure a new mortgage from your lender when you sell your property first. This is because your lender knows you are legally required to close on the sale of your current home for a specific amount of money. Basically, the bank knows they’re going to get paid for the new mortgage.
Another fact to consider is that sellers feel more confident in buyers who have already sold their current property. Why? Because the sellers will know you’re serious about the offer you’re making on their property.
When you’ve already sold your house, you’ve got firm deadlines in place to close on each deal. Your agent also won’t be writing a condition into the offer that’s contingent on selling your property before firming up the deal.
Renovating your current home may be cheaper than buying a new house
Even if you’ve been house hunting online, you may want to consider renovating your current property instead of buying a new house. But be aware, homes that come fully renovated at listing time tend to be priced at a premium.
This is because home improvements take time, and time is money to buyers. Not to mention, it can be tricky to book a contractor these days with good reviews at the exact time you need them.
To find out if it’s more cost-effective to renovate or buy a new home, first make a detailed list of any improvements you want to make to your current home and contact at least three well-reviewed contractors for quotes. The contractors you quote for the job will also be considering the current price of materials used to renovate.
This includes materials such as lumber, quartz or tile, so quotes can change over time. Be aware that prices for materials have increased significantly since the onset of the pandemic.
Next, ask your realtor for recent sale prices of homes that are similar to your dream home. These properties should already have the improvements you desire. Then simply compare the cost and time to renovate versus the cost and time to buy your dream home, complete with updates.
At the end of the day, you’ll need to consider all the pros and cons of buying a new house while staying in the old one. Or maybe you’re now considering a renovation instead!
Everyone’s situation is unique, but the one thing that doesn’t change is the fact that having the right professionals along the way to assist you is priceless, whether it’s your mortgage agent, contractor or real estate agent. Knowing the best real estate professionals working in your area is your best defence against paying out-of-pocket for unexpected fees along the way.
Frequently asked questions about buying a new house
A: Yes, but there are many pros and cons to buying a new house before selling your current one. You must first determine whether your mortgage can be ported to a new property. Check with your preferred mortgage agent to determine this.
A: Your lender may allow you to port your current mortgage to your new property. You’ll want to get in touch with your mortgage specialist to determine whether or not this is possible. If your current mortgage is not portable, you’ll have to prepay it and arrange for a new mortgage. Beware, this can come with significant early termination or prepayment fees, depending on how long is left on your current mortgage term.
A: It depends! Begin by making a list of the updates you’d require to stay in your current home. Next, ask your real estate agent for sale prices of properties similar to your dream home, that already have the improvements you desire. Don’t forget that renovations take time, and contractors can be tough to pin down in this post-Covid world.