What You Need to Know about Selling Your First Home and Moving Up!

We talk about first-time home buyers and downsizers a lot, but we often leave out the middle phase of your real estate journey that all first time buyers eventually get to – selling your first home and moving up!

If you’ve gone through the hurdle of buying your first home and now you’re thinking of selling your first home, this one’s for you!

You might remember the stress that came with buying your first home, taking that big leap into homeownership was likely a milestone in your life. Now, you’re ready for your next milestone, at least you think you are…

While the process of purchasing your second home is pretty much the same as the first time you did it, there are some new twists and turns for you to navigate.

If you want personalized advice now, book a free 15-minute call with Adam to discuss your real estate questions.

In this article we’ll walk you through:

  • How to balance buying and selling at the same time
  • Conditional Offers
  • Financing options that are available to you when you’re buying and selling at the same time
  • How to use your built equity
  • New fees that might arise

How to Balance Buying and Selling Your First Home at the Same Time

Buying and selling real estate all at once is a brand new experience for you. Last time around, all you had to worry about was the purchase of your home. This time around, you’ve got to juggle the purchase of a new home and sale of your current home.

The first step is to take a deep breath – you’re not the first to do this and you won’t be the last. You’ll get through it, especially if you have the help of an experienced real estate team on your side.

At our brokerage, our first piece of advice for clients looking to buy and sell real estate at the same time is to get your numbers straight. Working with an experienced team of real estate professionals means that you’ll get access to information that is key to making this huge decision.

When you work with us, we start by looking at your current property. We’ll do a walk through with you to get a sense of your home. From there we will review comparable properties that have sold in your area to get a baseline for pricing. We may even suggest small improvements like landscaping, painting, decluttering, and staging to help boost your home’s appeal.

Once we’ve compiled this information we can give you an estimated sale price and outline our sales strategy for your property. 

Tip: if you currently own a home and want to get accurate and timely estimates for its value, you should consider joining our Home Advisory Club. Members get access to exclusive content as well as a full property evaluation every 2 years, without the pressure to sell. This is our way of keeping you in the loop so you know exactly where you stand when it comes time to sell your home.

Armed with this new information you will have a better idea of where you sit financially and decisions can start to be made. At this point, you should know if you will need the profits from the sale of your home to purchase a new property. Depending on your answer to the previous question, you’ll need to decide if you’re willing/able to carry two mortgages during the process of selling your current home should you purchase a property first.

Now, the process of searching for your next property is virtually the same as the first time around. You’ll work with your realtor to find properties that match your needs and budget. It’s once you find your dream home that things are a little different this time.

Conditional Offers

If you’ve found your dream home and are ready to make an offer, consider a conditional offer.

Conditional offers mean that your purchase is contingent upon the sale of your current home.

When competition is high in the market, you may feel like a conditional offer just won’t cut it. In 2020-2022, when the market was at its peak, we saw a lot of unconditional offers. This is really a decision to make based on your comfort level and financial position. If you’re comfortable carrying 2 mortgages at once, you can decide to go with an unconditional offer.

Our advice is to always speak with a mortgage specialist before making these decisions. We have trusted mortgage professionals we work with that we can recommend to you, however many second-time buyers check in with their current mortgage advisor to see what options are available to them.

Financing Options Available When You’re Buying & Selling at the Same Time

There are a few options available to you when you find yourself juggling buying and selling real estate at the same time.

  1. Bridge Financing

In most cases, it’s likely that the closing dates on your purchase and sale will not perfectly align. That’s where bridge financing comes into play. Bridge loans roll the mortgages of two houses together, giving you some flexibility as you wait for your former home to sell. This can come with higher interest rates and is only available to those with great credit. However, it can give you peace of mind while you make this transition.

  1. Home Equity Line of Credit (HELOC)

A HELOC can also be used in a similar fashion to a bridge loan but it allows you to tap into some of the built equity you have in your current home. This option typically comes with lower interest rates and the repayment period is much more flexible. However, you typically need to have 20% equity in your home to qualify. 

Whether using a Bridge Loan or HELOC, you’re essentially using your loan to make a down payment on your new property while you wait for the closing of your current property.

Another financing option that may come in handy is porting your mortgage.

Porting your mortgage means that you can take the rate and terms from your current home to your new home. This depends on your mortgage lender and the terms of your current mortgage. You’ll want to review this with your lender and be aware of any prepayment charges that you may incur for breaking your mortgage early. If you require a higher mortgage loan for your new property, you may be able to blend your current rate to make up the difference.

Again, always speak with your mortgage advisor to understand your unique circumstances when it comes to financing!

How To Use Your Built Equity When Selling Your First Home

When you purchased your first home, it’s very likely that you weren’t able to put down 20%. Most first-time buyers put down the minimum 5% which triggers the need for mortgage insurance. This cost is tacked onto your mortgage payments and is an extra layer of protection for lenders.

With the equity built up in your home, this time around you will likely be able to afford the 20% down payment and avoid paying mortgage insurance on this new property. If you’re really lucky, you may be able to use remaining equity from your sale for renovations or other expenses that come up in life.

New Fees to Expect When Buying and Selling Real Estate at the Same Time

There are some new fees that you need to look out for when you’re buying and selling real estate

 When you were a first-time buyer, you paid your closing costs including lawyers fees, property taxes, and Land Transfer Taxes. When you’re a first-time buyer you get a Land Transfer Tax rebate which you will not be eligible for this time around.

You will also have to pay realtor commissions on the sale of your home, something you didn’t encounter when purchasing your first home. Fees vary depending on the realtor and this is something you should discuss with your realtor before listing. There is no set commission fee but typically it can range from 3.5 – 5% of the sale price plus HST.

Are You Ready to Sell Your First Home and Move Onwards and Upwards?

Hopefully this article has given you a lay of the land when it comes to this new phase in your real estate journey. However, we cannot stress enough the importance of getting personalized advice from a real estate professional and mortgage advisor. 

Everyone’s situation is different and it’s important to get an accurate idea of where you are at in your real estate journey. There are a million articles and online calculators you can try to use but the best way to get accurate information and advice is to talk to a real human.

If you’re an Ottawa homeowner and would like to book a call with Adam to discuss buying or selling your property click here. We offer free 15-minute virtual consultations so that you can access accurate information easily.

Remember, if you’re not quite ready to sell but want to be armed with information for when you are ready,  join our Home Advisory Club. It’s free and there’s no commitment to sell or work with our team in any way.

We sincerely wish you the best of luck on this new and exciting phase in your life!