Selling Before Buying vs. Buying Before Selling Property
When you're moving house, one of the biggest decisions you'll face is whether to sell your current property before buying your next one – or the other way around.
Getting the sequence wrong can lead to unnecessary stress, financial pressure or even the risk of ending up without a home.
Option 1: Selling your house first
Pros
- Financial certainty: You know exactly how much capital you have for your next purchase.
- Reduced financial pressure: You avoid double mortgage repayments.
- Stronger negotiation power: Having confirmed funds or being a cash buyer puts you in a powerful position when negotiating for your new home.
- Less stress if the market fluctuates: If property prices drop, you’ve already secured your sale price.
Cons
- Temporary accommodation needed: You may need to rent or stay with family if you don’t find a new home quickly, leading to the inconvenience of moving twice.
- Risk of rising prices: Property prices could increase while you're house-hunting, shrinking your budget.
Option 2: Buying your house first
Pros
- Seamless transition: You can move straight into your new home.
- Avoids rising property prices: If the market is trending upwards, buying first can lock in a better price.
- No pressure to accept a low offer: You won’t feel rushed to sell if you’ve already secured your next home.
Cons
- Financial risk: You could be paying two mortgages at once.
- Dependence on selling your current home quickly: You’ll need to sell your current home quickly to avoid extended overlap.
- Difficulty securing finance: Without a confirmed sale, it may be harder to get approved for a mortgage, and you might need a bridging loan.
- Pressure to accept a lower offer: If time is tight, you may have to compromise on your sale price.
What is a bridging loan?
A bridge loan in Australia is a short-term finance solution that helps you buy a new home before selling your current one.
How does it work in practice?
The lender covers the purchase price of your new property, then converts the loan into a standard home loan once your existing property is sold.
Who is it suitable for?
Homeowners with significant equity and a clear plan to sell in the short term, usually within six months.
Key considerations of a bridging loan
Interest rates may be higher than standard home loans. Lenders will want to see an exit strategy (that is, when and how you’ll repay the bridging loan), so timing is critical.
Key factors to consider when deciding
When considering buying or selling at the same time, several factors will influence your decision.
Your financial situation
- How much equity do you currently have?
- Can you cover the deposit for your next home?
- Is your income stable, and do you have strong borrowing power?
The Victorian property market
- Are homes selling quickly in your area, or sitting on the market for weeks?
- What do local auction clearance rates say about buyer demand? High clearance rates indicate a strong market, which can influence how quickly your home might sell.
- Have similar properties recently sold for your expected price?
Your personal circumstances
- Can you stay with family or rent short-term if needed?
- Are you working to a deadline, such as a new job or school start date?
- How much financial and logistical risk are you willing to take?
Strategies for a smooth transition (regardless of your choice)
Regardless of whether you decide to buy or sell a house first, these strategies can help ensure a smoother transition.
- Get a property appraisal for your current home: This gives you a realistic understanding of its market value.
- Obtain pre-approval for your new loan: This clarifies your borrowing capacity and shows you're a serious buyer.
- Work with an experienced local real estate agent: They can provide insights into the market and help manage the sales process.
- Consider a longer settlement period: Negotiating a longer settlement for your sale or purchase can provide more flexibility.
- Have a contingency plan: What will you do if your home doesn't sell as quickly as expected, or if you can't find a new home in time?
FAQs about buying and selling property in Victoria
What are stamp duty concessions in Victoria for existing homes?
While most concessions target new homes, eligible buyers may receive reduced stamp duty on existing properties. Check with the State Revenue Office of Victoria for current thresholds and eligibility.
Does the proceeds from selling my house count towards a deposit for a new home?
Yes – once your sale is finalised, those funds can be used as your deposit. If you're buying first, a bridge loan in Australia can help cover the gap until settlement.
Can you get a loan with a 5% deposit in Victoria?
Yes, but conditions apply. Some lenders offer loans with a 5% deposit, especially for first home buyers, but you may need to pay lenders mortgage insurance (LMI) and meet stricter lending criteria.
What is simultaneous settlement?
Simultaneous settlement is when your current home sells and your new home settles on the same day, reducing the need for temporary accommodation or bridging finance. It requires tight coordination between your solicitor or conveyancer, real estate agents and lenders.
Conclusion: Making the right move for your future
There’s no single right answer to whether you should buy or sell a house first – it depends on your finances, the market and your personal situation. What matters most is understanding the risks and opportunities of both paths and planning accordingly.
Navigating the property market can be complex, but you don't have to do it alone. Whether you're thinking of buying or selling first, Loan Market’s expert mortgage brokers can help you understand your options and secure the right finance for your unique situation. Talk with a broker to take the next step towards your next home.
Sources:
https://www.vic.gov.au/plan-stamp-duty-concessions
https://www.vic.gov.au/more-homes
https://www.consumer.vic.gov.au/housing/buying-and-selling-property/definitions#b
https://broker.loanmarket.com.au/loan-market-connect/blog/bridging-home-loans-melbourne