The process of either buying or selling a home can be quite stressful, but doing both at the same time? Well, that’s a bit of a balancing act, and most people get stuck trying to figure out where to even start. Do you buy a house first and risk getting stuck with two mortgages? Or sell a house first and risk having nowhere to live? Unfortunately, there is no easy “right” answer, but here are some things to consider when buying a house and selling a house at the same time to help make your decision easier.
Key Takeaways
- Selling your current property first ensures you avoid paying two mortgage payments, but it may require finding temporary housing before you move into your new home
- Buying a house before selling makes sense if you have enough cash saved for a down payment and can carry two mortgage payments at the same time
- Choosing the right option for you means considering your goals, tolerance for risk, and the local housing market conditions
Is it Better to Buy or Sell Your Home First?
There is no single correct answer to this question, as it depends on your goals and your personal financial situation. Factors to consider include your urgency to move, your tolerance for financial risk, and, of course, the local market conditions.
Generally, you have three options: sell your current home first, buy your new home first, or have a simultaneous closing.
Option 1: Selling First
Pros: Ideal for buyers with budget constraints who need equity for a down payment or cannot afford to carry two mortgages. By selling first, you have exact knowledge of your sale proceeds and available funds.
Cons: Risk of being caught “in-between” homes, requiring a short-term rental, double-moving expenses, or storage fees. It can also create pressure to buy quickly, which isn’t ideal in a hot seller’s market.
Best for: Homeowners who are concerned about carrying two mortgages or don’t have sufficient funds to afford a down payment to buy the new home.
Option 2: Buying First
Pros: Allows a relaxed home search at your own pace, giving you more time to find your dream home. Buying a house before selling can also make a single move possible with a more flexible moving schedule. In some cases, it can also strengthen your position in price negotiations when selling your current home because you are not rushing to secure your next property.
Cons: High financial strain if your current house doesn’t sell, potentially requiring bridge financing or leaving you carrying two properties for a few months.
Best for: Buyers with strong financial flexibility or those shopping in a buyer’s market.
Option 3: Simultaneous Closing
Pros: Allows a direct transfer of equity from your home sale to your purchase on the same business day, facilitating a single moving day without long-term bridge financing or interim rentals.
Cons: Requires precise synchronization among lenders, lawyers, buyers, and sellers on the closing dates. If one link in the closing chain stalls or delays funds transfer, the entire sequence can collapse or cause significant fees.
Best for: Organized buyers with firm sale and purchase contracts lined up with flexible closing terms that allow buffer room for closing-day delays.
Selling and Buying a Home at the Same Time: 3 Canadian Financing Options
Buying and selling a home at the same time can complicate financing, especially if you plan to use the proceeds from your sale as the down payment on your new home. Here are some options to help you finance the transactions.
1. Bridge Financing in Canada
Bridge financing is a temporary loan designed specifically for individuals who are buying and selling a house at the same time. A Bridge loan can range from 90 days to 12+ months, and is meant to help homeowners ‘bridge’ the gap between the sale of their original home and taking possession of the new home. This allows you to use the equity in your current home for the down payment on your next home. However, the lender requires a firm sale agreement on your current home before approving your application.
2. Sale of Property Condition (SOP)
If you find a home you want to buy before selling your current one, you can make an offer that includes a sale of property condition. This means your offer is contingent on the sale of your current home, ensuring you aren’t stuck paying two mortgages at once—or unable to secure financing for the new property. However, sellers may be hesitant to accept this condition, as the deal could fall through if your home doesn’t sell.
To reduce this risk, a seller might accept your offer only if it includes an escape clause (also known as a kick-out clause). This allows the seller to keep marketing the home. If they receive another acceptable offer, they can exercise the clause, giving you a set timeframe (typically 24 to 48 hours) to either waive your conditions and proceed with the purchase or walk away from the deal.
3. Mortgage Porting
Mortgage porting offers you the option to take your current mortgage with you when you move. This is ideal when you have a great rate, especially if it’s lower than the current existing mortgage rates, and you would like to transfer that rate to your new home. Porting your mortgage can also help you avoid any prepayment charges by breaking your mortgage.
Typically, mortgage lenders will provide a window of 30 to 120 days to complete the porting process, so this is only an option if you are selling your current home and buying a new one within that window. You should discuss mortgage portability options with your lender before listing your home.
Step-By-Step to Manage Both Transactions
If you are planning to sell your current home and buy a new one, preparing for the transaction and following these steps can make the process much smoother:
- Step 1: Get a realistic home valuation and mortgage pre-approval so you understand the market value of your existing home, estimate expected sale proceeds after mortgage payout, real estate agent commissions, and legal fees, and know what you can afford for your next home purchase.
- Step 2: Hire a real estate agent who is experienced in dual transactions to best help you navigate the buying and selling process
- Step 3: Explore your financing options to find the best fit for your financial situation and current real estate market trends.
- Step 4: Coordinate closing dates.
- Step 5: Build a financial contingency fund to cover additional costs from unexpected delays. For example, temporary housing costs, storage unit requirements, or additional moving expenses.
Bottom Line
Whether you should buy a new home or sell your current home first depends on your personal circumstances and your goals. If you need to move right away and have the financial means to carry two mortgages, you may buy a new home first and then sell your current home. On the other hand, by selling first, you can use the proceeds to purchase a new home and guarantee that you won’t be stuck paying for two homes.
Use our home valuation calculator to find out the estimated value of your home before you list. Then, speak with one of our expert local agents about buying and selling at the same time.
Selling and Buying a House FAQs
How long can a bridge loan last in Canada?
Most Canadian lenders offer bridge financing for 30 to 90 days, but some alternative lenders may offer terms of up to six months. To qualify, lenders generally require a firm Purchase and Sale Agreement for both your current and new homes and a good credit score.
What happens if my home doesn’t sell before I close on the new one?
If you bought unconditionally without selling, you may need to apply for short-term secondary financing, lower your asking price rapidly, rent out your current property, or carry two mortgages at once if you meet lender debt-service requirements.
Can I port my mortgage if I sell and buy at the same time?
Many Canadian lenders allow you to port your existing mortgage balance and interest rate to your new home. If your new home costs more, you can typically blend and extend your rate to cover the additional funds.
Should I use the same real estate agent for buying and selling?
Using a single agent or team when buying and selling often streamlines communication, simplifies timeline management between transactions, and can sometimes provide leverage for discounted commission structures.
