Buying a home before selling your home can be accomplished a few different ways.
- If your income, credit & debt servicing allows, you can simply qualify for a mortgage or HELOC through a bank when buying a home before selling your home.
- If you are like many Canadians, you can’t always qualify under traditional guidelines when buying a home before selling your home. However, if you have enough existing home equity you can qualify through Alternative Mortgage Lenders using inter alia.
How Does Inter Alia Work for Buying A Home Without Selling Your Home First
This would be done by placing a mortgage across both properties. Your current home would have a 1st or 2nd mortgage depending on if you currently have a mortgage on your property and the new home would simply have a 1st mortgage charge registered. If your current home does not have a mortgage on it, then a 1st mortgage would be secured against both properties.
Here’s how it can be done.
Take for instance your primary home is valued at $600,000 and you have $100,000 1st mortgage.
You are purchasing a new home for $750,000.
Your total value is $1,350,000 and your total mortgages are $850,000.
This would make your total 1st & 2nd mortgage 63% loan to value.
Advantages of Buying a Home Before You Sell Your Home
The advantages of buying a home before you sell your home can be many.
- Finding your dream home without being on a short timeline
- Ability to have flexibility in closing can give you opportunities more desirable to sellers
- Time to sell your home on your terms to maximize possible profits.
Disadvantages of Buying a Home Before You Sell Your Home
The disadvantages of buying a home before you sell your home can be many.
- Costs associated with obtaining a home equity loan. I.e. (legal fees, broker fees, lender fees “if applicable” title insurance, insurance binders, “if strata”. Strata Form B. Along with any payout penalties.
- Interest costs. Home equity loans come with a higher
- Market value changes. Real Estate markets go up, but they also go down.
What Happens When You Sell Your Old Home?
When you finally sell your old home, a few things may happen:
- If the proceeds of the sale are enough to payout your mortgage you will end up with a clear title home.
- If there are not enough proceeds from the sale of your home, you will end up with a 1st mortgage charge still registered for the balance owed. (We can then go to back to a bank and get you the best rate mortgage to payout the financing)