A common question I get from home buyers is this, “How can we buy a new home if we still have one to sell?” Buying a new home before selling your current one can feel like trying to line up two moving targets. You may have found the house you really want, but you also do not want to rush the sale of your current home or leave yourself carrying two mortgages for months.
The good news is that there are several ways to make the timing work. The right option depends on your current financial position, the equity you have in your current home, the local market, and how much flexibility you have with your purchase and sale.
Option 1: Make Your Purchase Contingent on Selling Your Current Home
One of the simplest approaches is to make your offer on the new home contingent on selling your current property. This gives you time to sell your home before you are fully committed to purchasing the next one.
This can make sense if you need the proceeds from your current home to fund the down payment or if carrying two mortgages would put too much pressure on your budget. The downside is that a seller may be less interested in an offer with a home-sale contingency, especially when competing offers do not have the same condition.
It is important to understand how competitive the market is, and if it’s a seller’s market, this type of offer is usually not very competitive.
Option 2: Sell Your Home With a Longer Closing Timeline
Another option is to sell your current home first, but negotiate a longer closing period. This can give you additional time to find and purchase your next home before you have to move out.
For example, instead of the typical 30 to 45-day closing period, you might negotiate 60 days or more depending on the buyer and circumstances. This strategy works particularly well when you already have a good idea of what you want to buy and your current home is likely to sell quickly.
What I recommend in this situation is implementing a contingency in the contract that the house you are selling cannot settle unless you find a new house to purchase before that extended settlement timeline ends. This prevents you from selling your current home and being homeless in the interim.
Option 3: Buy Before You Sell
If you have enough income and enough cash or available equity to handle the transition, you may choose to purchase your next home first and then sell your current one.
This gives you the freedom to shop without worrying about where you will live between homes. You also avoid having to make an offer on your next home contingent on selling your current property.
However, this option comes with some risk, as you could potentially be carrying two mortgages and paying two sets of bills for a few months while you wait to sell your current home. You would want to review your finances carefully, and be sure you have cash on hand to carry these expenses for several months.
Option 4: Use Your Current Home’s Equity
If you have built up significant equity in your current home, you may be able to use some of that equity to help purchase your next home before the first one sells. Two options are a bridge loan and a home equity line of credit, or HELOC.
These work differently, so it is important to understand what you are taking on before choosing one.
Bridge Loans
A bridge loan is designed specifically to help homeowners transition from one property to another. It can provide short-term funds based on the equity in your current home, allowing you to use that money toward the purchase of your next home while you wait for your existing property to sell.
The idea is to bridge the gap between the two transactions. Once your current home sells, the proceeds can typically be used to pay off the bridge loan.
Bridge loans are pretty tough to find for homeowners anymore. Many lenders will encourage you to get a HELOC instead.
HELOCs
A HELOC is a revolving line of credit secured by the equity in your current home. Rather than receiving a traditional lump-sum loan, you are given access to a credit line that you can draw from as needed.
A HELOC would likely provide more flexibility than a bridge loan, but it is not specifically designed for buying a replacement home. Interest rates, repayment terms and borrowing limits vary, so a lender can help determine whether a HELOC makes sense for your particular situation.
Since a HELOC is not designed to be a “bridge loan” between homes, you need to establish the line of equity before listing your home. If that is the route that makes sense, then you want to get that process started several weeks before listing your home.
The important distinction is that a bridge loan is generally intended as short-term financing to help you move from one home to another, while a HELOC gives you ongoing access to some of your home’s equity. Either option can add another monthly payment, so I would want to understand the costs and your expected timeline before recommending this strategy to a client.
Option 5: Negotiate a Rent-Back or Post-Closing Occupancy
Sometimes the easiest way to solve the timing problem is to sell your current home and negotiate an agreement that allows you to remain there temporarily after closing. This gives you access to your sale proceeds while giving you additional time to purchase and move into your next home.
This can be especially helpful when you have already found your next home but need a little extra time to coordinate the two transactions. It requires the buyer to agree, so it is not something you can always count on.
Build a Gameplan Before You Start Shopping
There is no single strategy that works for every homeowner. Your available equity, mortgage, finances, local market conditions, and how quickly you need to move can all change which approach makes the most sense.
That is why I like to sit down with all my prospective buyers to understand their individual situation and their goals. We will put together a CMA to see what your current home could realistically sell for, estimate your proceeds, discuss how long it may take to sell and then build a gameplan around getting you the most for your current home while putting you in the best position to purchase your next one.
If you are looking to buy and sell in Chambersburg or the surrounding Southcentral PA area, I would love to meet you and review your options to get you into a home you love!