Buying Before You Sell Your Home

There are many reasons why you would want to buy a new home, before you have sold your old one. One of the most common reasons, is that you have come across a property, which has just hit the market, which is ideal for you. If you have found your dream home, then you'll do almost anything to ensure that you'll be the next proud owner - that means, you need to act fast!

Sometimes, due to lack of planning or even luck, you have fallen in love with and decided on a property, but you have not yet sold your current property, and don't have access to the funds to put down a deposit or make the purchase. You'll need to sell your current property to get access to the funds you need, which are currently locked up in the equity of your current home. All this takes time, and the seller is unlikely to wait for you, when another buyer is ready to make the purchase.

What are your options, and what is best for you? Read on...

Advantages of Buying Before You Sell

Your particular situation will be unique, however there are some general advantages to consider:

1. You get to live in your dream home - you don't lose it, while waiting to sell
2. In a market with rising house prices, buying sooner may save you money on your purchase
3. In a market with rising house prices, selling later may increase your potential sale price
4. You don't need to find and rent temporary accommodation, have the hassle of putting your belongings in storage and then moving again

If you have built up equity in your current property, you'll have some financial options, which will allow you to buy before you sell. As a general rule, with rising house prices, buying first and selling later could work in your advantage.

Disadvantages of Buying Before You Sell

There are some potential disadvantages to consider, and your individual circumstances will also need to be factored in to any decision:

1. You'll have to find the money or finance to cover the two properties, until you sell
2. In a market with falling house prices, buying sooner may cost you more
3. In a market with falling house prices, selling later may reduce your sale price
4. If you have arranged the purchase, 'subject to' the sale of your property, you will have pressure to accept a lower offer on your property sale
5. Your property may not sell for as property, and that could cause financial problems with the purchase of your dream home

One method to mitigate the pressure to accept lower than expected offers on your property, would be to agree an extended settlement period, in the terms of your property purchase, if possible. This may not be very appealing to the seller, if they have a few offers. However, if they too need time to find a property, it may be mutually beneficial.

This will depend on how much equity you have built up in the property you are selling, plus other financial considerations, depending on your circumstances.

Most people are aware of bridging loans, however there are a few other options:

• Pre-Settlement Advances
• Early Deposit Release
• Bridging Loans
• Home Equity Loans

Pre-Settlement Advances

If you think you'll be able to complete the sale of your property, within around 60 days, then this is an option to consider. Pre-settlement advances are meant as a short term funding solution, much like a fast bridging loan, but generally for a shorter period of time. Settlement advances are available, when your property is currently under an unconditional offer, and has an agreed settlement or completion date, which is less than 62 days away.

One huge advantage of settlement advances, is that they can be approved and funded very fast, and with us, within 24 to 48 hours of application. If you've found your dream property and need to put down a deposit or bid at auction, but don't have that kind of cash handy, until the sale completes, Settlement advances are a good option to consider.

Early Deposit Release

Also called a section 27 early deposit release, allows the vendor, or home seller access to the deposit that the buyer has put down on the property, prior to the settlement date. They are only available in Victoria and take some time to be processed or approved. Unlike bridging loans, an early deposit release, is only available when a property is under an unconditional offer and only in Victoria. Depending on your needs, the deposit may or may not provide enough funds for your needs.

Bridging Loans

Bridging loans are used to 'bridge the gap' when wishing to buy a property before you sell your existing property. One advantage of bridging loans, is that it will allow you to buy a new property before you even start the sale process of your current property. They generally run for between 6 and 12 months and sometimes longer, such as 24 months when using the funds to build your dream home. If the funds are needed in a hurry, bridging loans may take a few weeks to be reviewed and approved. This may not be suitable, if you have already found your dream home, and need to put down a deposit or offer urgently.

See our bridging loan alternatives for more options.

Home Equity Loans

Home equity loans, give you access to the equity you have established in your current property. As the loan may not be directly tied to the sale of your current property, you could end up owning the two properties. This could give you more time to prepare your property for sale and secure the best sale price.

See our home equity loans page for more details.