Posted on Mar 31, 2021 in Blog
Don’t let the sale of your current home get in the way of your new home dreams! Here are five strategies for helping you buy and sell a home at the same time.
1. Consider a New Home Build
New home builds offer Edmonton home buyers a unique opportunity to perfectly time the sale of their existing home with the construction of their new one. Like any home purchase, you’ll need to have your down payment ready before the building of your new home can begin. However, unlike any regular home purchase, you won’t be required to take on a second mortgage until your new home is finished.
Opting for a new home build doesn’t mean you’ll have to wait the customary 6+ months* for your property to be constructed, either. Reputable custom builders in the Edmonton area often have homes in various completion stages, including spec homes and move-in ready models. These types of builds may be preferable for homeowners who are prepared to sell their current property much sooner.
See our previous post: Newly Built vs Previously Owned Homes: The Pros and Cons
2. Bridge the Gap
Simply put, a bridge loan (sometimes referred to as bridge financing) is a temporary form of funding that allows homeowners to “bridge” the gap between the sale of their existing home and the down payment on their new one.
For instance, if you’re interested in purchasing a new home in Edmonton but are unable to come up with a down payment until your current one sells, this type of loan allows you to use the existing home’s equity as a deposit on the new property.
3. Put Your Equity to Work
Home equity lines of credit (HELOCs) are yet another way you can leverage your current home’s equity to purchase a new property before selling your existing one. Like a bridge loan, a HELOC is a short-term financing solution for a down payment. HELOCs are typically lower interest, and borrowers have the flexibility to access only what they need when they need it (i.e., you only pay interest on what you use).
This is an ideal solution for home sellers who have built up a substantial amount of equity in existing home, keeping in mind the loan can be repaid as soon as the home is sold.
4. Port Your Mortgage
In the case of porting your mortgage, you’ll still be required to come up with the down payment for your new home before selling your existing one. However, when buying and selling at the same time, your lender may allow you to take your current mortgage contract, rate and terms and transfer it to your new home.
So long as you can coordinate the sale of your current property with the purchase of your new one, this option may allow you to avoid the hassle of taking on a second mortgage and costly pre-payment penalties. If the new home you’re purchasing requires a larger mortgage amount, porting may enable you to secure a more favourable interest rate via blending and extending.
5. Utilize an Unsecured Loan
Last but not least, home sellers looking to purchase a brand-new Edmonton home before selling their existing one may choose to take advantage of an unsecured loan or line of credit. While this type of financing may come with a higher interest rate, they are a good option for a) home buyers needing their down payment but haven’t built a lot of equity in their current home and b) home buyers with excellent credit wanting to borrow their down payment.
San Rufo is an award-winning home builder specializing in creating unique, functional and beautiful custom homes in Edmonton and the surrounding areas. For more information on how we can help you realize your new home dreams, get in touch with us today!
*New home build timelines can vary according to customization choices, weather, supplier availability, etc.