Thursday December 3, 2015
A first-time homebuyer has it easy in some ways. They don’t have a home they need to sell before purchasing one. If you’re in your own home and thinking about building a new home, you have a big question to ponder.
“Should I sell my home before I build a new one?”
The answer will depend on many things—most importantly, your personality. Are you a worrier or a risk-taker? Do you need a safety net or can you walk the tightrope supported by your confidence that you’re not going to fall?
Less Risk, More Inconvenience
Selling your home in advance of buying a new one is the safest way to ensure you’re not carrying two mortgages at once, but this scenario has certain issues attached.
You might need to find temporary housing, unless your buyers are willing to give you extra time. If you have to move out—and can’t stay with family or friends—you’ll need to find a short-term rental. With school-aged children, you might be required to live within the school district in order for your children to attend their school. Check the regulations before making your decision of when and where to rent.
Pet owners sometimes have difficulty finding a rental that accepts their four-legged family members. You might need to make temporary arrangements for them elsewhere.
Finally, you’ll essentially have to move twice—which means changing your address twice. Initially, you’ll move out of your current home and put your furniture and possessions in storage. Then you’ll move again when your new home is ready.
More Risk, A Simpler Move
Can you afford to two mortgages if your current home is still on the market when you’re ready to close on the new one? If you quality for the additional mortgage, the problem ends there, although no one wants to carry the additional debt.
You could rent your present home once your new home is ready, and use that rental income to cover the mortgage cost. You might also secure a bridge loan to cover you until you sell your current home.
Certainly, homebuilders will offer a contingency option that gives you an “out” if your existing home hasn’t sold, but that means you give up the dreams of this new home—in addition to the time and money already invested. And someone else is going to live in the home you created.
Before you make your decision of whether to build your new home first or sell your existing home, talk to a Realtor about current housing market conditions in your area. How long are comparable homes on the market? This information gives you an estimate to work with. Your home could sell much sooner or take longer.