Should you sell your house before buying a new one?

Should you sell your house before buying a new one?

UPDATE DAY

“This is what we've been looking for for years,” says Agathe. What do we do? » she adds, turning to Simon. You can't take on two mortgages, he thinks, even if the house fell in his eye too. 

In what order should a buyer proceed? Sell ​​your house first, then buy the new one? Or vice versa?

Faced with the prospect of taking out two mortgages, even if only for a short period, one option for the buyer would be to submit an offer to purchase including a 72-hour clause. 

72-hour clause

An offer to purchase is a contract between two parties. Agathe and Simon can include a condition, namely the sale of their house. Thus, they do not risk having to assume two mortgages at the same time.  

This is called a 72 hour clause. This allows you to submit an offer to purchase, while putting your house up for sale. However, the seller retains the possibility of finding a new buyer. If this eventuality occurs and he presents a higher offer than that of Agathe and Simon, the latter would have 72 hours to react. Once that time had elapsed, their offer would no longer stand. 

If the number of potential buyers exceeds the number of houses offered, it is likely that the seller will refuse the conditional offer including a 72-hour clause. A tempting offer, such as offering more than he asked for, could perhaps change his mind.

But Agathe and Simon do not want to run the risk of missing the opportunity to acquire the house of their dreams. What are the possibilities ? There are other avenues, of course, but they are more expensive.

Bridge financing

As its name suggests, bridge financing allows owners to link the sale of their home to the purchase of a new one. How does it work? The equity of the first is used to finance the down payment of the second. It is a short-term loan, often a maximum of six months, which bridges the two real estate transactions. Offered under different names, most financial institutions offer this type of product which provides some peace of mind to those who are in a hurry to buy a new home.

Line of credit mortgage

A homeowner could also apply for a line of credit by offering their house as security. Thus, the amount of the margin would be used as a down payment for the purchase of the new house.  

These forms of short-term financing make it possible to proceed with the acquisition of a new property, while saving time so as not to sell your house at a discount.

Advice

  • Do Applying for bridge financing or a home equity line of credit as soon as possible, before you even put the house on the market.
  • Use the services of a mortgage broker or a real estate broker will help you make the right decisions, while carrying out the transactions in the right order.

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