If you are thinking of upgrading your home in the near future, you undoubtedly have many questions on your mind. Some are easier to answer than others.
Want to know how much your current home is worth? That’s as easy as doing a quick assessment.
The most pressing question that we get asked a lot is “What should I do first?” Is it better to sell your home before you look to purchase a new one? Or should you look now and buy while still in your current house? Depending on your financial situation, and the current real estate market, there is a strong case for both.
The Pros and Cons of Buying First
The significant advantage here is equity. The longer you keep your current home, the more equity you build. And with the market going up, your home naturally increases in value over time.
You can use this equity to finance your new purchase. Now, you’re building wealth on two properties. Buying first is ideal in many situations, but it’s not the right choice for everyone.
Who should buy first?
Buying first is an excellent option if both of these scenarios apply:
- Your finances allow you to hold two properties comfortably. (Interesting fact: this is the exact strategy some investors use to build their long-term wealth!)
- You don’t need to move urgently and have time to decide and plan. If you buy first, there is no rush to leave your current house. You can take your time packing and moving, which eliminates most of the stress from the process. Buying first also gives you all the time you need to find the perfect home, and you won’t need to settle for anything less.
The disadvantage is it can be a heavy burden to carry two mortgages. And unless your financial situation is very secure, buying first can be risky. If you cannot make both mortgage payments, you could lose one or both properties.
The best way to minimize this risk is to thoroughly analyze your finances to know if you can afford two payments, and for how long.
It’s also wise to have all the minor repairs and staging done on your current home, so it’s ready to sell on short notice if you ever feel overwhelmed.
Want to know more about what it means to sell your home this year? Here are some more resources to guide you:
- Housing Market Insight for January 2022
- What You Need to Know About Selling a Home in 2022
- Our Top Seven First-Time-Seller FAQs
The Pros and Cons of Selling First
The advantages of selling first are clear. You have the cash in hand for a down payment on your new home. With this guaranteed financing, you can place strong offers and compete with other buyers. Selling first takes all of the guesswork out of the equation. You will know precisely what price range you can afford.
The disadvantage is how quickly the market can move after you sell. Prices are still on the rise. If you sell too early, you may find it challenging to re-enter the market.
Selling first may also put you in a time crunch. Closing dates are firm and don’t give you much time to find and purchase a new home.
Again, these risks can be reduced by having a plan in place.
You can research what’s available in different areas. For example, a home in Burlington right on the Lakeshore may be out of your price range. But if you’re flexible about your location, you’ll find more affordable options.
With a plan in place, you’ll be in a solid position to move quickly with your sale and subsequent new purchase.
Who should sell first?
You should always sell first if you have any concerns over your finances or you know you can’t bear the cost of two mortgages.
- Selling first is ideal when you need to move quickly. If relocating for a new career, you probably won’t want the workload of owning two properties even for a short time.
- You’re not comfortable with the risk associated with buying. Even if your finances allow you to carry two mortgages, it doesn’t mean you should. Deciding whether or not to take that risk is a highly personal choice, and not one to take lightly.
What does buying a home look like in 2022? Check out some of our other informative articles below:
- What You Need to Know About Buying a Home in 2022
- The True Cost of Buying a Home
- What You Need to Know About the New Stress Test Changes
Whether you decide to sell or buy first, you need a strategy and expert guidance. A professional real estate agent who is familiar with the area is a resource you don’t want to be without. If you have any questions about buying or selling, we can help!
