Buy then sell or sell then buy

This estimator provides an indication of the costs you will face depending on the order in which you sell your old home and buy your new one.


Buy then sell, or sell then buy?

Packing up house and moving from one property to the next is a necessary step for most home owners, and if upsizing isn’t inevitable, downsizing surely will be.

But not all people are born to be natural property buyers and sellers, nor completely prepared for what’s to come.

However, being armed with a suitable strategy, and seeking professional advice from a mortgage broker or financial adviser will better ensure that you can secure new home owners into your property fast, and that you can just as quickly go-on to become a happy home owner yourself.

About the Buy Then Sell or Sell Then Buy Calculator

Buying a new home can be an expensive process. It can also be a difficult juggling act to coordinate the purchase of the new property and the sale of the old property.

Your Mortgage’s Buy Then Sell or Sell Then Buy Calculator gives an indication of the costs you will face depending on the order in which you sell your old home and buy your new one.

It does not include all the costs associated with buying a new home. It only attempts to capture the costs associated with the timing of the purchase and the sale.

So while the cost of moving once is not included in the calculator, the extra cost associated with the double move is, because this relates to the timing of buying and selling your property.

It is important to note that the calculator supplies broad indicative estimates rather than figures which will be precisely accurate for every case.

For example, this estimator does not take into account the mortgage termination fees (‘break costs’), which may be payable when a loan is paid off before completing its agreed term, as these costs are determined by each lender differently and relate specifically to each individual case.

How do you sell and buy a home at the same time?

Most people have three main goals when buying and selling a home at the same time:

  • To sell their current house for the highest price possible
  • To purchase a new house for an affordable price
  • To get through both processes with as little stress as possible

The first thing you will need to focus on is improving or renovating your current home and ensuring you pay down as much as you can on your current mortgage in extra repayments. This will boost the equity in your home.

However, even after you have done this, you may be left wondering whether you are better off selling your home first and then buying a new one, or buying your new house and then selling your current one.

From a logistical perspective, settlement on the new property should occur a few days before settlement on the old, minimising the hassles involved in transporting your possessions from one home to another.

But according to John Smith, CEO at Inspired Finance Group Pty Ltd, this option may cause rather dire financing issues, and also heavily depends on whether it’s a seller’s market or a buyer’s market

In a buyer’s market, I would always suggest you sell your home first. The last thing you want is to be paying interest costs on two loans, or seeing equity in your properties eaten up, because you can’t sell your own home. You may be able to cut down costs with short-term rentals, but that may cause problems in regards to open house inspections. Of course, you could rent out the house you just bought,
Smith says.

In a seller’s market Smith suggests that buying first might be the best option, as your property should be sold quite quickly.

Overall, I would always suggest you sell first, keeping in mind that you can extend the settlement date to allow time to find a property. Also – remember to keep other options open, like family or friends that may help in a pinch,
he says.

Lisa Montgomery, former head of marketing and consumer advocacy at Resi, warns against selling your home before you have found your new house.

One of the hurdles you have to get over when selling before you buy (and renting) means that you’re doing a double move – and also that you’re getting out of the market and it can be hard to get back in. So you need to have your finger on the pulse so you don’t miss out on the same market,
Montgomery says.

Selling your home first

The logical order is to sell your home first and buy second, simply because this will allow you to know exactly how much money you have to spend.

Historically, a lot of homeowners have overestimated the worth of their current homes and purchased from an optimistic position, only to find themselves in dire financial straits.

Selling first means you will be less likely to get caught short by over-extending yourself on your new home.

However, by selling first you may be forced to rent while you look for a suitable new home. And this can cost you two moves, two lots of utility connection costs and two packing and unpacking efforts.

Alternatively, you could check into a hotel or check in with family and put your furniture in storage. This can be costly, both financially and emotionally, especially if it takes a substantial period of time to find your new home.

One way around this is to request a lengthy settlement period to allow you ample time to find a new property.

However, one of the biggest risks you will face if there is an extended gap between sale and purchase is that rising property prices will mean you get less for your money as time goes by.

If you are able to invest the equity you receive from your sale, you may be able to earn a return for the interim period, but this is generally only advantageous for owners who have built up a significant amount of equity.

For example, if you have paid off approximately 20% of the purchase price of your currently owned property, say $80,000, you could earn a return on this amount while waiting to purchase your new home.

If you were earning 5% on your money in a cash management account and the situation dragged on for a year, you would earn $4,000 on your $80,000. It’s a decent return and will help offset the increase in property prices that have occurred during that period. But if prices have increased by 10% during that time, you’ll still be paying thousands of dollars to make up the difference.

Buying your home first

For those who are financially capable, buying your home first has its advantages.

Primarily, it can dispense with the hassle of renting in the interim period. This is often a major concern for the elderly, owners with young families and those with furniture requiring storage.

Many buyers also find their dream home prior to selling, or even prior to contemplating selling their home. Purchasing before you sell may be the only way to ensure you don’t miss out on that special property.

But there are several disadvantages to buying before you sell. First off, there is often pressure to sell the existing property quickly when a new home has already been purchased. This may result in a lower than anticipated price being accepted and leaves the seller vulnerable to unexpected fluctuations in the property market.

In a slow market it may take more time than you had estimated to sell your first house. If you have bridging finance, you are effectively committed to paying off a loan over two properties until such time that your existing home sells, which can prove costly.

Loans touted as ‘bridging loans’ have various guises. It’s important to understand how these loans operate so you can determine whether they will be suitable for your particular financial situation.

About this calculator

The results provided by the calculator are to be taken as a reference or guide only. Results only rely on the information provided.

It should also be noted that results do not indicate the way in which a property should be sold or bought, or which of these processes should come first, nor do they act as a determiner.

A formal assessment should be independently sourced, ideally in consultation with a financial adviser and/or mortgage broker.

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