Buying & Selling Simultaneously

A Smooth move Buying and selling simultaneously

Jackie Woodward // Mortgage Broker // TMG [email protected] // 780.433.8412 // www.mortgagegirl.ca

You own a home now, but it’s time to make a change. If you’re moving up or downsizing you probably have

questions about how it all works.

This article is about the logistics of buying another home while you still own your existing property.

Here are 10 facts you need to know about navigating

through the two transactions at once to make the move as smooth as possible.


A Smooth Move

GET THE FACTS ON YOUR EXISTING HOME


A Smooth Move

Find out the value of your home by asking a realtor to provide you with a detailed market evaluation. Or get a

detailed estimate of value by paying for an appraisal by a licensed appraiser. This will give you an idea of what

residual funds you will net from the sale of your existing home which will determine how to structure a new

mortgage for the new home.

Be conservative when working with the downpayment amount so you have some wiggle room when negotiating

the sale of your current home.


A Smooth Move

After you have determined what new mortgage amount you will require, you will then need to contact your current lender to ask them 3 questions;

1) Is the mortgage portable to a new property?

2) If it is and you are moving up, can the new mortgage rate be “blended”

and what will that new rate be in order to avoid paying a payout penalty.

3)Lastly, if you were to pay the existing mortgage out in order to get a better rate, what would the penalty be?

Do be advised you are required to qualify for any new mortgage whether

you “port” the existing mortgage to a new property or get a brand new one as you are effectively only “porting” the terms of the mortgage.


A Smooth Move

You now need to decide how you’re going to sell your current home.

Although there are other options available to sell your home, I will always recommend using the services of a realtor as I personally would like to leave any showings

and negotiations with any potential buyers in the hands of a professional.


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FINANCING YOUR NEXT HOME


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Based on your initial findings about your current residence, I recommend obtaining a pre-approval for

your next purchase as this will give you an idea of what kind of requirements you’ll need to meet in order

to be approved for your next mortgage.


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Your new mortgage may contain a condition to confirm your existing place has sold. This could be for either downpayment or qualifying purposes or both.

See if a back-up plan is possible in case your existing

home does not sell by the time you take possession of the new home.

Your mortgage professional can work through a few

potential scenarios with you until you’re comfortable with the options you have for all possible outcomes.


A Smooth Move

Perhaps you are looking into the possibility of keeping your current home and turning it into a rental property. Some lenders will allow

this as long as you can qualify to carry both properties. Talk to your mortgage professional about the option of including potential rental

income to help you qualify.

Be aware the lenders tend to calculate the inclusion of rental income differently, so if you don’t qualify with your current lender,

check others.

If you are leaning to keeping both properties, ensure you explore all options in accessing funds for the downpayment on the new home. Is a gift from a family member a possibility or do you have sufficient

funds in savings, or can you look at refinancing your current residence to access the equity.


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If the downpayment is coming from anywhere other than the sale of your existing home, the requirements are pretty

straightforward, your lender will look for the paper trail to support the source of the funds being used.

If the downpayment funds are coming from the sale of a

property, you’ll be asked to confirm what your equity position is via a current mortgage statement as well as a copy of a fully executed sale agreement for your current

residence along with all condition removals related to that contract.


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Qualifying for your next home will be similar to getting approved the first time. Your lender will be looking at the

usual application aspects like income, credit, downpayment, and the property you’re financing.

If your income or credit profile has changed drastically

such as you becoming self-employed or your credit isn’t as good as it used to be, be sure to have a conversation with

your mortgage broker about how the qualifying process could differ from the first time around.


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While many of our mortgage rules have changed, document requirements haven’t changed too much

since you last qualified.

What you’ll be asked to provide will be dependent on your current financial profile. Your mortgage

professional, along with a mortgage pre-approval will give you an idea of what you’ll be asked to provide in

terms of supporting documents.


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If the possession date for the sale property is after your purchase possession date and you need those funds for downpayment, worry not as there is a solution known as bridge or interim financing. The lender will not only finance your mortgage, they will also give you a short-term loan to cover the downpayment. This way the seller gets their money and you

get possession of your new home even though your old home is still technically yours.

Once your existing place has sold, your lender will recover the funds they

lent to cover your downpayment. It is important to note that you must have an unconditional or firm offer for your existing home in order to

qualify for bridge financing.

Be aware not all lenders offer bridge or interim financing and the terms and costs for this service with the ones who do can be quite different, so

double check the conditions before you commit.


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It can be stressful to sell and buy simultaneously and as you can see from the previous slides there are a lot of things that need to go right in order for everything to go smoothly for you. The

best way to ensure a smooth move is to do your research first. Explore your options until you find one that allows you to

confidently move forward into your next home while leaving the last one fondly behind.


A Smooth Move

Jackie Woodward Mortgage Broker, TMG 780.433.8412 [email protected] www.mortgagegirl.ca Twitter @mortgagegirlca

Real Estate

Buying & Selling Simultaneously