Here’s my advice on buying your next home first then selling.
This seller’s market presents a great opportunity for homeowners to get top dollar on the market, but it’s not without its challenges. Potential sellers are on the hunt for answers to one key question: “How do I buy first before selling my current home?”
Of course, the easiest way to address this issue is to simply have the cash on hand to purchase a new property in full—but that doesn’t do the vast majority of buyers any good, does it? The only real way to finance the purchase of a new home before selling your current one is to ensure that that financing comes straight through the equity you already have. There are two main ways to accomplish this.
The first is via a bridge loan, which is a product that was popular pre-2008 and has since made a comeback. With it, the lender will finance your down payment into a new loan that you currently hold. It’s meant to be repaid when you move into the new home and close escrow on the sale of your former home.
The second way to tap into your home’s equity is by using a home equity line of credit, or HELOC. Essentially, these are revolving credit doors that you can withdraw from to finance all sorts of things, including the down payment and closing costs on a new home.
I will say, however, that taking on extra debt may not be the best call in every situation. While buying a new home before selling your old may sound exciting, know that other equally viable options that necessitate more debt.
Even before implementing things like bridge loans, you should first explore the rent-back option. Since you have the upper hand as a seller, you can ask your buyer if they’re willing to give you a rent-back period. This allows you to rent out your former home for a certain amount of time, during which you can browse the market for your next home. If you do go the rent-back route, be aware that most conventional borrowers will only be able to give you a period of roughly 60 days per the loan rules.
Lastly, if you want to put yourself in as strong of a position as possible when buying your next home, you may want to maximize your sale now and utilize a short-term rental in the interim. This may not be the advice most people want to hear since nobody likes moving twice, but it’s the best way to liquidate your biggest asset and present yourself as a strong buyer.
As always, reach out if you have questions about this or any other real estate topic, please reach out by phone or email. I’d love to speak with you and find out more about your specific needs so I can better assist you.