Secure your new home first, then sell your old property

The perfect new property has been found, but the current home is still waiting for a buyer. For many owners, this creates a difficult transition period, as the purchase price, closing costs, and ongoing expenses must be managed simultaneously. Interim financing can bridge this gap and facilitate the move without undue time pressure during the sale. However, realistic planning is crucial. Careful calculation of the loan amount, sale price, loan term, and available reserves ensures a smooth transition and avoids financial difficulties.

Cleverly bridging financial overlaps

With interim financing, the bank provides capital for a limited period, which is later repaid from the proceeds of the sale of the old property. Often, the equity already accumulated in the existing house is temporarily used for this purpose. Depending on the situation, a short-term loan, an interest-only loan, or a combination with long-term mortgage financing may be suitable.

During the transition period, interest typically accrues on both properties. Therefore, owners should not only calculate based on the expected sale price but also include a safety buffer to cover marketing time, price negotiations, moving costs, and potential renovations. Furthermore, the loan term should be generous, as a sale can take longer than expected despite strong demand. Early repayment without significant additional costs provides extra flexibility once the purchase price is actually received.

Building trust with verifiable documentation

Banks scrutinize very carefully whether the planned sale is realistic and whether repayment is secured. Therefore, a professional market valuation, current land registry documents, information on existing loans, and a reliable overview of income, expenses, and savings are helpful.

Equally important is a plausible marketing timeline. Having a real estate agent already engaged, high-quality sales materials, and a transparent pricing strategy strengthen your position with the lending institution. The more transparent your overall financial situation is, the easier it will be to agree on a suitable solution with manageable monthly payments.

Choosing the right process for buying and selling

Buying outright isn't always the best option. Those with flexible timing can sell first and bridge the gap with a temporary rental or a later handover. Alternatively, a longer move-out date can be agreed upon with the buyer of the existing property. However, if the new property is rare, in high demand, or particularly suitable, interim financing can be a sensible solution. It's crucial to calculate several scenarios and factor in potential delays. Tax, notary, and contractual deadlines should also be reviewed early to ensure that payments, property transfer, and loan repayment run smoothly. A good real estate agent coordinates viewings, the purchase agreement, marketing, and handover dates, thus reducing the risk of prolonged double financial burden.

Do you want to buy first and then sell? We coordinate both steps, assist with scheduling, and connect you with suitable financing partners. Get in touch!

Notes

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

Photo: © Wordliner/Image created with OpenAI's ChatGPT

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