Published July 12, 2023 • 3 Min Read
Buying versus selling a home first, or vice versa can depend on a few factors. Your financial situation, market state and the timeline for making a move can influence your decision.
Buying first
Buying your next home before selling the one you’re living in may offer a few advantages, though there are some challenges to consider.
Advantages may include:
-
Being able to take your time and find the right home for you
-
Establishing your timeline for moving into your new home easier
-
Moving from one home to another without worrying about finding temporary housing or storing your belongings
-
Once moving out of your old home, you can make any updates or repairs needed so that it’s ready for potential buyers to view
Challenges:
-
You’ll have two mortgage payments to manage, along with double the utility bills, until your old home sells.
-
Cash may be tight until the home sells if you’ve put most of your liquid assets toward the down payment on a new home.
-
Changes in the market may make it harder to sell your home or leave you with a smaller profit than expected.
Selling first
With careful planning, selling your home before buying a new one could work in your favour. However, there may be a few bumps to work out as you transition from one home to another.
Potential advantages:
-
Selling first can make it easier to narrow your home-buying budget
-
Proceeds from the sale can go toward a down payment on your next home, so you don’t have to dip into your cash reserves
-
You can take your time to shop around for the right home and negotiate a final purchase price
-
You’re not doubling up on mortgage or utility payments
Challenges:
-
You may have to move twice if you need to find temporary housing until you buy your next home.
-
Finding temporary housing could get expensive if you have to sign a month-to-month lease
-
Market increases could make buying your next home more expensive than you anticipated
What to consider before buying or selling your home first
Asking the right questions can help you decide whether it makes sense for you to buy or sell first. Here are a few questions to ask yourself before making a decision.
-
Do you have the money for a down payment on a new home, or would you need to use cash from the sale of your current home to cover it?
-
Could you handle two mortgage payments for a few months if necessary?
-
Is the housing market favouring buyers or sellers at the moment?
-
If you were to buy a home first, how long would it really take to sell your current home? How much profit can you expect from the sale?
-
Can you deal with any mental or emotional stress that might accompany moving into temporary housing while you find a new home to buy if you were to sell first?
Talking to a real estate professional or a mortgage specialist at your bank can give you some perspective on whether buying or selling a home first is a better fit financially. You can also use a mortgage affordability calculator to estimate how much you might be able to spend when buying your next home.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
Share This Article
