Moving house: Buy or sell first?

Buying a home can feel like an overwhelming task, especially if you already own one.

Moving house typically isn't a favourite activity among home buyers, and it's easy to see why. Purchasing a home while you already have one can lead to unique complications, making it important to determine whether you should sell your home before trading up.

Selling first

Selling your home before purchasing a new one comes with many advantages. Besides freeing you up to focus solely on your new home, it can also provide you with a sizeable down payment for your new mortgage.

Of course, selling your current home before buying your new one also comes with its own challenges, chief among them being: Where will you live?

Renting a hotel room can be expensive, and it can be difficult to find an apartment to rent on such a short-term basis.

Buying first

While purchasing your new home first takes care of the burning question of where you'll be living, it presents some obstacles of its own.

First, if you take out a new mortgage before paying off your previous one, you'll be faced with making double the amount of mortgage payments.

Second, finding a sufficient down payment for your new loan will become much more difficult if you don't have the proceeds from selling your old home.

Then again, special options exist, such as bridging loans. These types of mortgages are short-term loans that bridge the gap between selling your old home and buying your new home.

Typically they only require you to pay money toward interest, as opposed to the principal balance. These loans usually only last for a few months.

Making a decision

How you move house ultimately comes down to personal preference, as well as specific circumstances.

However, one strategic way to decide on a plan is to let the market decide for you.

Different fluctuations in the housing market will turn in favour of either buyers or sellers depending on demand.

When the market favours buyers, purchasing a home before selling might make more sense. And vice versa when the market favours sellers.