Option 1: Buying first

Buying a new home before selling your current one can be appealing, especially if you want time to find the perfect property without rushing. It also allows you to move directly from one home to the next, avoiding the hassle of finding a temporary rental or putting your belongings in a storage.

However, there are financial factors to consider:

• Securing a deposit – Buying first means coming up with a deposit for your new home, which can be difficult if your equity is tied up in your current property.
• Two mortgages – Carrying two mortgages is often necessary if your current home doesn’t sell quickly, creating financial pressure as you’ll need to cover both loan payments for a period. This may also impact the amount you can borrow due to servicing.
• Uncertain sale price – Another consideration is that you won’t know the exact price of your current home when you buy. Once you’ve bought your next home, you might end up selling in a rush if you need to close the sale quickly, and possibly accept a lower price than expected.
• Relying on a bridging loan – Many buyers who buy first use a bridging loan to finance the new property until their current home sells. While helpful, these loans come with higher interest rates, so it’s essential to weigh the costs carefully.

Option 2: Selling first

Selling your current home before buying a new one can provide a clearer financial picture and reduce certain risks. This option is often considered safer, though it has its own potential drawbacks.

Here are the pros in a nutshell:

• Clearer budget – Selling first gives you a clear understanding of how much you have for your next purchase, making budgeting easier and more precise.
• Reduced financial stress – With your home sold, you won’t have to worry about managing two mortgages or a bridging loan.
• Better negotiating power – With cash from your sale, you may have better negotiating power when buying your next home, which can make your offer more attractive to vendors.

As we mentioned, however, there are some potential drawbacks to this approach:

• Need for temporary accommodation – If you sell before finding your next home, you may need to arrange temporary accommodation. This could involve renting (maybe in a tight rental market), staying with family, or putting your belongings in storage, which can be costly and inconvenient.
• Pressure to buy quickly – After selling, you might feel pressured to find your next home quickly, which can lead to settling for a less-than-ideal property. To help ease this, try negotiating a long settlement period on your sold home, giving yourself extra time.

How the property market affects your decision

Market conditions can have a big impact on whether buying or selling first makes more sense:

• Vendor’s market – In a vendor’s market (like the upturn of 2020-2021), homes are in high demand, selling quickly and often for higher prices. Buying first may be more feasible in this environment, as you can feel more confident your current property will sell quickly. However, competition for homes might make it harder to find your next property within budget, and prices may continue to rise while you search.
• Buyer’s market – When buyers have the upper hand, there’s more inventory, and homes tend to sit on the market longer. Selling first is generally safer here, as finding a buyer for your current property might take time. You may also have more negotiating power as a buyer, allowing you to take your time finding the right home.

Not quite sure? Talk to a real estate agent who understands your local market. They can provide insights into market trends and help you time your sales and purchase more effectively.

Need mortgage advice? Get in touch

Looking to finance your next property move? We’re here to help. Your Mortgage Link adviser can guide you through your options, discuss solutions like bridging loans, and help ensure a smooth transition to your next home.