Buying First: The Case For It
Buying before you sell means you are not scrambling to find a home under time pressure, and you can move once instead of twice. This works best when you have enough savings or access to a bridge loan to cover two properties temporarily. It also lets you negotiate on the purchase without a rushed timeline hanging over you.
- No temporary housing needed
- Time to find the right home
- Requires strong financial cushion
Selling First: The Case For It
Selling first tells you exactly how much money you have to work with, which removes a lot of guesswork from your mortgage application. The tradeoff is you may need to rent short term or negotiate a longer closing to bridge the gap. In a slower Toronto market, sellers sometimes prefer this path because it avoids carrying two mortgages at once.
Bridge Financing Explained
A bridge loan lets you access the equity in your current home before it officially closes, so you can use it toward the down payment on your new home. Lenders typically require a firm sale agreement on your existing property before approving a bridge loan. Costs are usually a modest daily interest charge plus an administration fee.
How Your Mortgage Approval Changes
If you buy before selling, a lender may need to qualify you as if you are carrying both mortgages, unless your current home is already sold firm. This can affect your maximum purchase price. Talking to a mortgage broker before you start house hunting helps you understand your real budget under either scenario.
Which Path Fits the Current Toronto Market
When homes are selling quickly, buying first can feel safer since you avoid losing out on a property while your own sale drags on. In a slower market, selling first can reduce financial risk since you are not stuck holding two properties. Your agent can give you a read on current absorption rates for your specific neighbourhood and home type.
Frequently asked questions
- Is bridge financing expensive?
- It is generally reasonable for short periods, often a few weeks, but costs can add up if your closing dates end up far apart, so plan the timeline carefully.
- Can I make my purchase offer conditional on selling my home?
- Yes, this is common and reduces your risk, though in competitive situations a conditional offer may be less attractive to sellers.
- What if my home does not sell as fast as expected?
- This is the main risk of buying first, which is why lenders and brokers usually recommend having a financial cushion or a clear backup plan before committing to a purchase.