Selling and Purchasing
It is important to understand all your options when preparing to sell and purchase as it can be a tricky process.
Once you have decided you would like to sell and purchase, like most individuals you may be asking yourself what makes the most sense, to sell your existing property first and then buy a new home or vice versa? Ultimately, it will depend on a number of factors including the real estate market and your personal/financial situation.
Traditionally when home owners sell and purchase the down payment comes from the sale proceeds of the home being sold. Even if clients have the down payment from their own resources most individuals (not all) do not qualify to carry 2 mortgages.
An ideal scenario is if you qualify for both mortgages and have the down payment from your own resources and not from sale proceeds.
If you do not have the down payment from your own resources or do not qualify for 2 mortgages please see scenarios 1 and 2 below:
- If you sell first, then there is a timing issuing to find a new home and coordinate the dates so that you can transition from one home to the other. Worst case scenario is that if you don't find a new home in time you have to temporarily rent or move in with family until you find a new home.
- If you buy first and your down payment is coming from the sale proceeds of your existing property or you do not qualify for 2 mortgages (existing mortgage and new mortgage on new property), you must have a firm sale on your existing property. The firm sale should be in place at least 2 weeks (possibly earlier depending on the lender) before the completion date of the purchase. Once you remove subjects for the purchase of the new property, and if for some reason you cannot sell your existing place in time, then there can be legal ramifications not to mention loss of your deposit. Please speak with your realtor regarding potential ramifications and professional advice regarding selling and purchasing strategies.
Ideally the completion date for the sale is before the completion date of the purchase. As much as your realtor attempts to coordinate the closing dates to accommodate this timeline, it is not always possible.
If the down payment is coming from the sale of your existing property and the completion date for the sale is AFTER the completion date of the purchase then a bridge loan is required. Please refer to bridge loan explanation in the drop down menu.
Please note different lenders have different policies regarding bridge financing and there are other factors to consider when purchasing first.