Normally people sell their house at the same time as looking for, or putting an offer in, on another property. This forms a chain. However, in some situations people decide to sell before they buy another property. Whilst this can be risky, it can also have its advantages.
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Should You Buy A House Before Selling Your Own?
Selling your property quickly before buying another means that you’ll have cash in the bank once you find a property you want. If you also have a pre-approved mortgage then you’ll be in an even stronger position when it comes to buying. Because you’re not in a chain, you’ll be more desirable to a seller who may be wanting to complete quickly.
If you’re selling your property before buying a new one, you won’t need a quick sale, therefore you can wait for the right price. The same can be said for when you are ready to buy – house prices may have dropped, meaning you’ll get a better deal on your next house. You can also try to slow down the selling process by agreeing a specific period of time you’re happy to wait before agreeing an offer and, then again, before exchanging and completion.
Having said all of that, we should also mention the potential down-sides of selling before you buy. There’s a chance you will have to rent until the right onward property comes along and this can be expensive. It would be much more cost-effective if you could stay with relatives or friends until you’re ready to buy, but make sure you give yourself (and them!) a realistic timescale for this so it doesn’t affect your relationship.
There’s always the possibility that house prices might rise whilst you’re looking for a new property. This could mean that you can’t afford to buy the house you want when it comes down to it.
By being organised, doing your research in the areas you want to live and having a mortgage already agreed, you should be able to buy your next home fairly quickly for a decent price. If taking your time is your desired route then use that time wisely by keeping an eye on the property market and building relationships with estate agents in the area you want to buy. By doing this, you can swoop on the right property at the right time because you’re informed.
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This can be a stressful option for some, but, if you have enough of the above in place, then you should get a good deal and a new home in a reasonable timeframe.
If you decide that selling on the open market is not what you want to do and you feel that selling quickly is a better option then The Property Buying Company can help. As cash buyers, we can buy your property in a timescale to suit you and all of our legal fees are included so there are no hidden costs.
How To Buy A House Before Selling Your Own
If you are determined to buy a new house before selling your own, there are a few ways in which you can do this but we wouldn't always advise them.
Here are a few methods of how to buy a house before selling your own:
- Having the funds yourself: If you have the funds yourself, you could open up an additional mortgage as long as you have the percentage required deposit, usually 10%. This will obviously mean that you are having to pay for both properties on a monthly basis, so you need to have enough regular income to be able to cover this from the mortgage providers prospective. You'll likely get your deposit money back when you sell the property.
- Use a Bridging loan: Bridging loans are short term loans that can be used where interest is charged monthly, but it can allow you to take out a loan just to move home. There convenient loan but are usually at higher interest rates.
- Borrow from family members: This is probably the best solution, granted you pay it back and don't have any falling outs about it. If you can borrow the money off a family member with no interest, just until your home sells, it can be a quick way to move into a new property before selling yours.
Advantages of Buying Before You Sell
Although it's a bit of a risk, there are quite a few advnatages of buying a house before selling your own. We've listed some of them for you below:
- You can move on with your life much quicker
- You might find a really good deal on your dream home and have to act quickly to purchase it
- Less chance of issues in the buying and selling process as they will be completing at different times
- Not rushed into taking a lower offer on your property - if you can afford to wait for the right price of course
Disadvantages of Buying Before You Sell
On the flip side, unfortunately there are quite a few disadvantages to buying a home before selling your home, and it carries far more risk than buying a home in the traditional way. Here are some of the disadvantages:
- There's an inherant risk of owning two properties, due to the increased cost of bills.
- Additional costs if anything was to go wrong in the property you are selling - Imagine if the boiler breaks, could you afford to fix it and pay for your new home?
- Can you afford for the property not to sell for months? Perhaps you will need to drop the price, are you able to do this and still pay off the potential loan that you've had to take out buying the new property.
- If the market crashes, it could affect the house price of the property your selling.
- You'll likely have to get a loan to achieve this, so not only paying two sets of bills, you might also be paying interest on the loan.
General Tips To Buying Before You Sell
- Have a contingency plan - Set in motion a back up plan if the home doesn't sell in a period of time, be prepared to drop the price or even perhaps sell through an alternative method such as ourselves or auction.
- Don't just scrape through buying the next property - make sure you have back up funds should anything go wrong in the property you are selling.
- If you're going to get a loan, make sure you get one with the lowest interest & make sure you check if there are any fees for paying it off early / exit fees.
- Always try and borrow in a way that there is no interest - look to use family and friends if at all possible.
- Wait! I know missing out on your dream home can be disappointing, but think about the risks of buying before you sell, they can be crippling and might even result in you being unable to pay the bills on the new property.