CENTURY 21 B.J. Roth Realty Ltd., Brokerage*
- 4 Pine River Road, Unit 8
Angus, ON L0M 1B2
What do men and women think?
CANADIAN HOME CRITICS survey results
Pros and cons to buying a house before selling
It’s important to know the potential consequences of your real estate decisions Reporter: Joe Richer, Special to the Star “Our family is growing and we’re ready to move to a bigger home. Should we buy first or sell first?” Once you become a homeowner, chances are you’ll be faced with this tough decision at some point. There is no “right” answer to a dilemma like this; it’s a personal decision that should take into account your current circumstances and tolerance for risk. Or, more accurately, which kind of risk you prefer.
Buying first increases the risk of higher expenses. Selling first increases the risk of having to live “between homes”.
Buying first can make the house hunting experience more enjoyable. Without a closing date looming on your existing home, you’ll have time to wait until the right home comes up for sale. It can also be less stressful knowing that if your offer is unsuccessful; you have time to wait for the next opportunity to come up.
The downside to buying first is if you are unable to sell your home fast enough, you will find yourself owning two homes at once. The result is you could be paying two mortgages at the same time, not to mention all the other costs of homeownership. Also, you may have trouble obtaining a mortgage for the new home. Before you make an offer on your new home and potentially find yourself in this situation, carefully weigh whether you’re financially able to pay for two homes at once. If the purchase of your new home closes first, you might need something called “bridge financing” to cover the down payment and other closing costs until the sale of your current home closes.
As a buyer with an existing home to sell, you can protect yourself by adding a condition to any offer you make. In addition to the highly recommended conditions on financing and inspection, you can also make your offer conditional on the sale of your current home. That means if you’re unable to sell within a specified period of time, you’re able to back out of the transaction. However, it’s worth pointing out that this condition will likely make your offer less attractive to the seller because of the uncertainty for them.
The biggest benefit of selling first, aside from removing the risk of owning two homes at once, is you’ll know how much money the sale brought in, which will help determine how much you can afford to pay for the next place. As helpful as that is to know, the challenge is that you’ll find yourself in a race against the clock, with your closing date looming. If you’re not careful, you may end up rushing the process and settling for a home that isn’t ideal for you, or paying more than you planned because you feel pressured.
Have a contingency plan
Regardless of whether you buy first or sell first, it’s a good idea to have a contingency plan in case your closing dates don’t align, leaving you with two homes, or no home, for a period of time. If the sale of your home closes first, you might consider a short-term rental or moving in with family or friends. The best advice is to speak with your real estate professional. They have the knowledge and experience to help you decide which decision is better suited to your circumstances, and because they won’t be as emotionally invested in the decision as you, they will be able to provide more balance to your decision-making process.
First published in the Toronto Star on November 22, 2013 - See more at: http://homeownership.ca/homeownership/real-estate-...
As a CENTURY 21® Real Estate professional, I am dedicated to providing you with the highest quality service possible. My personal knowledge of the local Real Estate market is combined with the power of the CENTURY 21 brand - the most recognized name in Real Estate today.
Let me assist you in finding your dream home, in a neighbourhood that is right for you, and in the price range you want. Or if you are interested in selling a property, I also have the expertise to help you get the fastest sale possible and at the best price.
I look forward to working together with you to ensure that you make the right move.
What do new mortgage rules mean?
Last week, new mortgage rules came in to effect that will influence qualification requirements for people financing residential real estate. These changes are a “stress test” to ensure that borrowers have the ability to repay their mortgages if interest rates rise in the future.
The biggest change is that borrowers will need to qualify at the Bank of Canada's 5 year Benchmark rate, currently 4.64%, rather than the current discounted rate.
For example, if someone has an annual income of $60,000, a 5% down payment, and no household debts, before October 17th, 2016 they could qualify to purchase a house worth $331,000. After October 17th, 2016, that same client will now qualify for a purchase price of $262,600.