Selling a home can be the most stressful experience of your life.
You have to prepare to sell your home, find a real estate agent, clean the home, pack up the kids/pets, show the home, negotiate an offer, do an open house, more showings, and then more cleanings. To add to that long list of tasks, if you’re purchasing a second home you’ll often have to get a second down payment, bridge loan, or carry two mortgages.
The Old Fashioned Way – Qualifying for a new mortgage
Getting a second mortgage is much the same as getting a first – you’ll need to gain pre-approval before shopping for a new home. Once you’ve gained pre-approval you can begin your home search, but keep in mind that you’ll need to pay two mortgage payments for as long as your first home doesn’t sell. Speak with a mortgage lender first, but a good rule of thumb is that you should have lower than a 42% debt to income ratio (this means that the total cost of all your debts should be lower than 42% of your total monthly take home).
Your current mortgage may be transferrable to your next mortgage if certain conditions are met, so make sure to discuss that option with your mortgage lender as it may save you money in penalties/fees.
Other ‘old fashioned’ financial vehicles for buying a new home and selling your current one:
- Bridge Financing – Instead of a second mortgage many large lenders will offer bridge financing for set times and smaller amounts of money. Typically bridge financing can extend to 120 days for amounts of up to $200,000. If you require more money then you will likely need special terms or to engage in a second mortgage.
- Contract Contingency – This method allows you to put a contingency in your contract in that the purchase of your next home is reliant on your first one selling. While this seems good on paper, a contingent offer is not considered strong in this real estate market and lower offers with no contingencies are often accepted.
- Rent-Back Agreement – This method is also considered a weaker offer in today’s real estate market, although you may find some home buyers who would prefer it. A rent-back agreement allows for the new homeowners to rent your home back to you for a certain length of time.
- HELOC (Home Equity Line of Credit) – If you’re selling a home that has increased in value or if you’ve paid off some of your mortgage then a HELOC may be right for you. A HELOC is a home equity loan that allows you to access a portion of your home’s value at fairly low interest rates. You may be unable to open a HELOC if your home is currently listed and financing may be removed if market conditions change so it is best to get approved for this prior to looking into purchasing a home.
The Sweetly Way – Sell your home on the day you choose
If you’re selling and buying then our Swift Sale program is ideal for you. Choose your closing day so that you don’t need to pay two mortgages at the same time. Purchase your dream home without worrying about a ‘subject to sale’ condition. We make the home buying process easy when you’re buying and selling a home.
How does it work?
Tell us about your home, you’ll get a computer generated evaluation and comparable sales in your area. We’ll then arrange for a licensed Appraiser to view your home and set the price. It starts with an appraisal to determine the current value of your home. We’ll give you 90% of appraised value on the moving day you choose. Then we’ll list the property for sale at an asking price that you agree to.
Once you’ve moved out of your current home, we’ll take care of the rest. We’ll prep, stage, and resell the property.
Should you sell your old home before buying your new home?
With Sweetly, you don’t have to choose. You get all the advantages and none of the seller pains.
If you are using a traditional method to purchase your next home then here are some of the advantages and disadvantages you might run into whether you are selling or buying first.
Advantages of selling your home first
- You’ll have an easier time getting a new mortgage as your debt to income ratio will be much lower.
- You will not need to carry two mortgage payments, you’ll have more financial flexibility.
- You will have more money from the sale of your existing home to put towards your new house. This allows you to purchase a larger/better home.
- Your offer for your next house will be much stronger as it will not be contingent on selling your current house. Depending on your local housing market many sellers may not accept a contingent offer, this is especially true in a seller’s market.
- You have more time to wait for the right offer as you are not in a rush to sell your current home (Unless your dream home is on the market).
Advantages of buying a new home first
- No need to find temporary housing or a short-term rental.
- It may be easier to sell your current home because you aren’t living in it (less inconveniences and cleaning).
- You have the ability to make renovations in your new home before moving in.
Sweetly helps alleviate all of these seller pains by allowing you to choose your own closing date and giving you the necessary capital to purchase a new home on your own timeline.
