Sometimes, life leads us to situations where we need to buy a new house before selling the old one. This can be a challenge, especially if we are still paying a mortgage on our current home. But, don’t worry, there are solutions available.
How to buy a house before selling the previous one?
Ideally, we would like to sell our current home before buying a new one. However, this is not always possible. You may not find a buyer in time or you may find your dream home before you sell yours. In these cases, you may need to buy a new home before selling the old one.
If this is your case, it is important to keep in mind that if you have not yet finished paying the mortgage on your current home, the bank may make it more difficult to grant you a new mortgage. And if you are granted, you will have to pay two installments for a period of time.
Solutions for buying with a mortgage
If you need to take out a mortgage to buy your new home, and you still have a mortgage on the home you are selling, here are some options:
Cancellation of the mortgage
You can pay off the mortgage as soon as you sell the house. When you buy the new one, you will take out a new mortgage.
Apply for a new mortgage
This option is only viable if you can assume the costs of two mortgages at the same time.
Negotiating mortgage subrogation
This option implies that the previous loan is transferred to the new owner’s name. The bank must approve it, otherwise it will not be possible.
Bridge mortgage
The bridge mortgage is a temporary solution that can be interesting for those who have a mortgage on the old house, but need to buy another house without having sold the main one.
The Bridge Mortgage: a temporary solution for housing changes
Some banks offer the bridge mortgage as a loan for those who want to move house. With this type of mortgage, the bank allows you to mortgage two houses with the same credit. The money borrowed will be used to pay for the new house, canceling the mortgage on the old house.
In this type of mortgage, the bank usually offers a grace period or a reduction of installments for a period of time. This will give you a margin to sell the previous home without losing the opportunity to acquire the home you want.
This is an approach that may be useful for those who have a mortgage on their current residence, but are looking to acquire a new property before selling their existing one. Some financial institutions offer this type of loan to customers looking to move home, and in some cases, can cover up to 100% of the cost of the new property, excluding associated expenses and taxes.
The maximum time allowed to complete the transaction varies depending on the applicant’s financial situation and the bank’s policies.
In this type of mortgage, the client is often offered a grace period in which he can sell his current home, thus providing a margin to sell the old property without losing the opportunity to buy the new one. Once the old house has been sold, within the term agreed with the bank, the money obtained from the sale can be used to pay a portion of the debt. Logically, this amount will be equivalent to the existing mortgage and the debt will be paid off. From that moment on, the mortgage will apply only to the new property, which means that the monthly payments will increase.
However, if prices are declining, it would not be advisable to consider a bridge mortgage, as there is a risk of not getting the true value of the property. It is also beneficial to have a comfortable financial position that allows you to cover the monthly payments, even if you do not manage to sell your home.
Tips for buying a home before selling
If you already know that you want to buy your new home before selling, take note of these 3 tips that we offer below to ensure your success in both processes and make them much easier:
- Examine all the extra costs of the purchase and subsequent sale: as you can imagine, the buying and selling process has some costs associated with it. The best thing is that before starting with all the procedures, you should calculate well what expenses these actions will have and if you will be able to afford them.
- Choose a mortgage with financing that fits your needs: a very important factor in any home buying process is to choose financing according to your financial situation. Therefore, do not choose a house whose price is very high, since the cost of the mortgage cannot exceed 30% of your monthly income.
- Let yourself be advised by experts in the field to sell and then find a new home: buying and selling a home is not a simple task, as you need to have a good knowledge of the local real estate market and know all the associated procedures. For this reason, it is best that you let yourself be advised by experts in the field, such as real estate agencies.
As you have been able to see, moving house is not a simple task. That is why, at Destiny Home, we suggest that you benefit from the experience of our real estate agency. Our team knows the local real estate market and can offer you the best advice for selling and buying a home.
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