Buying a new home and selling an existing home at the same time has its own set of difficulties. With planning, however, you can ensure everything goes smoothly.
Before putting your house on the market or committing to buying a new one, take a look at the prices of houses in the areas where you'll be both selling and buying. You'll need a realistic idea of how much similar houses are going for. Since you're both a buyer and a seller, you'll need to protect yourself in your weaker role while letting your stronger role take care of itself.
What if you're unable to perfectly time the sale of one house with the purchase of another? You may own no houses for a time, in which case you'll need money in the bank and a temporary place to live. Or, you may own two houses at once. That's why it's important to have a back-up plan. Here are some options to consider:
- Research short-term rental and storage options(family, friends, storage facilities, containers)
- A bridge financing is a loan for the down payment on a new home backed by the equity in your old house, typically at prime plus two percentage points.
Another option is a no-ratio mortgage. This is usually made based on the buyer's down payment, credit scores or assets. Income isn't used or reported, and therefore will not exclude a borrower from receiving this mortgage. Rates are often higher but you can refinance later.
Alternatively, you may be able to draw on a home equity line of credit on your old home. However, you might pay a penalty fee if you sell the house within a year.