Buy First or Sell First – The Smarter Way to Move
On paper, selling your current home before buying a new property makes sense. In terms of the basic mathematics, most homeowners are reliant on the sale of their existing homes to fund their relocation.
Unless they can find a buyer and successfully close the sale on their current home, they cannot afford to move into a new home. Hence, the sell-first, buy-later approach adopted by most.
All well and good, but this is also the approach that sees homeowners across the country becoming links in fragile property chains. You need to sell your home before you buy your next property, but what if the sale falls through at the last minute?
What if the seller you had lined up struggles to sell their home, or their prospective buyer’s sale falls through for any given reason?
Selling first and buying later is not without its pitfalls, as anyone who has watched their dream home slip through their fingertips will attest to. Buying first and selling later could therefore be the more desirable option, but has typically been exclusive to those with the on-hand capital needed to purchase homes in cash.
Opting Out of Property Chains the Affordable Way
Today, there is a viable option available for many homeowners looking to sidestep the hazards of property chains. If you have sufficient equity tied up in your current home, a bridging loan could be used to ‘bridge’ the gap between buying and selling.
A bridging loan works in a similar way to a mortgage, though is exponentially faster and more temporary in nature.
Using your current home as collateral, you could take out a bridging loan to raise the funds needed to purchase your next home outright. You benefit from the spending power of a cash buyer, and you have every opportunity to beat competing bidders to the punch.
After purchasing and moving into your new home, you leave your previous home on the market for as long as it takes to sell it for the best possible price. You have already paid for your new home and the loan is accruing interest at no more than around 0.5% per month, so there’s no need to rush.
When you find a buyer for your home a few weeks/months down the line, the sale goes ahead, and the funds raised are used to repay the bridging loan. Rather than becoming reliant on a wholly unreliable property chain, you completed your move on your own terms, and took all the time you needed to sell your home for its maximum market value.
Using an online bridging loan calculator you can work out the cost of loan repayment beforehand to see if this is a viable option for you.
Consult with a Broker
If you are considering the buy-first, sell-later approach, consult with an independent broker to discuss the options available. Your broker will help determine your suitability for bridging finance, while negotiating on your behalf to ensure you get an unbeatable deal from a top-rated lender.
For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.
