Should You Buy a New Property Before Selling Your House?

If you think you’ve found your dream property but are yet to sell your existing property, what do you do? You might have found yourself in a situation where you can’t sell your current property as part of the same property chain.

We understand the frustration of finding the perfect property but not being able to get yours off the market. There could be several reasons why you’re considering buying a new home before selling your current property, like having to relocate or upsize quickly. To find out everything you need to know about buying a new property before selling your current house, continue reading.

Can You Buy a Property Before Selling Your Current Home?

Before deciding whether you should or shouldn’t buy a new property before selling your current home, it’s important to know if you actually can or not. It is possible to buy a new property before selling your home.

However, doing so could come with some difficulties. Whether the property market conditions aren’t great right now or you simply can’t miss out on getting your dream home, there are many reasons why people buy a property before selling their current one.

The typical process of moving properties involves working with a local estate agent, putting your home up for sale, accepting an offer, getting a mortgage, and putting an offer on the home you want. However, going down an alternative route of buying before selling your current home is a different process, and several factors should be considered before starting this journey.

Which is Better – Buying First or Selling First?

Is it better to buy a house before selling your home, or sell your home and then buy a property? Ultimately, the decision is up to you. However, buying a home without selling your current property first could prove difficult over time, with more expenses involved.

When you buy a home before selling your current property, you technically own two properties until your previous one is finally sold. There are pros and cons to buying first and selling first.

Buying Before Selling Your Current House

Pros:

• You’ll have more time to find the right property
• When you’re able to purchase a new home without relying on the funds from your property sale, you could be seen as a more attractive buyer compared to others
• You won’t have to worry about additional funds for renting, as you can stay in your current home until you get accepted on your new property

Cons:

• You’ll need to be able to afford your new property purchase price without relying on money made from your current home sale
• You might need to take out a bridging loan
• Funds will be required for added costs that come with owning more than one property
• When you do finally sell your current home, the value could decrease, resulting in less money from the sale

Selling Before Buying Your New House

Pros:

• You’ll be ready to move into a new property right away
• You have a clear understanding of your budget for your new home
• You’ll be in a better negotiating position

Cons:

• Additional funds will be required for rentals or hotels to stay in while you find a suitable home
• If you’re yet to find a new home, you might be unsure how much to accept on your current property
• You’ll need big enough storage for all your belongings while you search for a new property

How to Buy a House Before Selling Yours in the UK

So, how do you buy a home before selling yours? Unless you have personal savings to fund the new property purchase, you’ll likely need a bridging loan.

Bridging loans are short-term loans given by the bank which help cover the gap between any money you’re expecting (from your house sale) and debt that you’re currently facing. Typically, bridging loans are used when:

• You want to purchase a home before selling your current
• You want to purchase a home that’s unmortgageable
• You’ve found a property you want but are unable to get the funds for it right away

To be eligible for a bridging loan, you need to:

• Be over 18 (some lenders have a higher age limit)
• Prove that you’re a UK resident or a UK national residing abroad
• Be employed or retired (you can be self-employed too)

Before considering getting a bridging loan, you should have a good credit score and a way to pay back the funds (in this case, using the money from selling your current home).

How much you can borrow is often decided by the condition of your property and your credit history, to name a few. The loan is offered on an interest-only basis, which means that rates could be high. You’ll also need to put down a deposit the same way you would for a regular mortgage.

Tax Implications

Numerous tax implications apply when you own more than one property. Regardless if you only own two properties for a short amount of time, you’ll still be required to pay additional tax throughout the buying and selling process. When you buy a property before selling your current one, you should be aware of these two taxes:

1. Stamp duty land tax – Stamp duty is applied to all properties in the UK worth over £125,000. How much you need to pay increases depending on the value of your property. No matter how you’ve purchased your new home, you’ll need to pay stamp duty land tax, and if you buy a home before selling your current property, expect to pay an increased amount (usually 3%)

1. Capital gains tax – capital gains tax (CGT) only applies if you own more than one property. When you finally come around to sell your current home, expect your profit to be lower than expected, as you’ll need to pay CGT once it’s sold

Finding Your Dream Home

At Liam Gretton, we help clients across the Wirral area find their forever home. Regardless of whether this is your first or second property, we encourage you to work with our team of expert estate agents to find your next humble abode.

Our dedicated team has worked with a diverse range of clients on the Wirral by getting their property off the market and streamlining the home-buying process. It’s our experience, hard work, and unique techniques that set us apart from others in the industry.

To kickstart your journey of finding the right home for you and your family, please get in touch with us today!