Selling and buying a home

You own a home but you’re looking to sell it and buy a new home. Maybe you want more living space, a yard for the kids to play in or a quieter neighbourhood? If you’re like many home owners, you’d prefer to time your sale and purchase to occur around the same time. While this approach isn’t always feasible, there are strategies available to help you.

Strategies for selling and buying simultaneously

• Try to coordinate closings for your current and new homes so they happen around the same time. Because you’re at the mercy of the market as well as potential buyers and sellers, it can be challenging to align closing dates, but you may succeed with good planning, communication and some luck.
• In a buyer’s market, when making an offer on your new home you could include a contingency in your contract stipulating that your offer to purchase stands only if your current home sells. However, in a hot seller’s market, conditions will generally make an offer less attractive to a seller because of the potential uncertainty of the transaction.
• In a seller’s market you could make selling your current home contingent on buying your new home or you could potentially rent back your house for a period of time.
• Take out a bridge loan to help “bridge” the gap between the time you sell one property and purchase the next. Most commonly considered by homeowners in competitive markets, bridge financing enables you to use the equity in your current home to make the down payment on your next home, while you wait for your existing home to sell. When you do sell, you can use the proceeds to pay off the bridge loan and any accrued interest.

If you have more flexibility in timing, you might also have two other options—sell your current home before buying your next one, or buy your next house before selling your current one. Whatever approach you take, your decision will depend on a number of things, including your appetite for risk, your current financial situation and external factors like the housing market.

Advantages of selling your home first

• You’ll have an easier time getting a new mortgage.
• You’ll avoid the financial burden of carrying two mortgages at the same time.
• You can put money from the sale of your current property toward the purchase of the next property.
• It will be easier to negotiate/buy the next home because it will not be contingent on selling your current home. Sellers will know you’re serious. This is especially true in a seller’s market.
• You can wait for the best selling price because you will not be in a hurry to close on a new home.

Advantages of buying your new home first

• There will be no need for you to live “between homes”.
• You could have an easier time getting your home ready to sell after moving out.
• You could make improvements and renovations to your new home before moving in.

Contact your mortgage specialist and/or a real estate professional to discuss your options for managing the logistical challenges and complexities of selling one home while purchasing another.

The strategies, advice and technical content in this publication are provided for the general guidance only and benefit of our clients. This publication is not intended to provide specific mortgage, financial, investment, tax, legal, accounting or other advice for you, and should not be relied upon in that regard. Readers should consult their own professional advisor when planning to implement a strategy to ensure that individual circumstances have been considered properly and it is based on the latest available information.

Personal lending products and residential mortgages are offered by Royal Bank of Canada and are subject to its standard lending criteria. Some conditions apply.