Is 2025 the year you sell your current home and buy a new one? Whether you’re ready to relocate or your family is growing or you’re finally in a place to graduate from your starter home, the process is an exciting step. At the same time, working the timing of both transactions can feel daunting.
For many, the equity earned on the current home makes the next home purchase possible. Most families don’t have an extra down payment readily available without accessing funds from their current home. Juggling this fact with the average closing time for buying a new home can result in a stressful time crunch because:
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you don’t want to move out of your current home without a place to stay (and a place to store your belongings) while you shop for and close on your next home, but…
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you can’t shop for your next home without the equity from your current home, and may not even have a thorough understanding of your budget without offers on your current home.
Fortunately, there are a few strong options for addressing this common sticking point, each suited to different circumstances. Don’t hesitate to reach out to discuss which option is best for you.
Post-closing Occupancy Agreement
One way to sell your current home before you buy your next is by including a post-closing occupancy agreement in the sale of your home. This means your buyer is agreeing to allow you to live in the home after the closing date. In many cases, these agreements involve paying rent to the new buyer.
With the agreement of the buyer, you can stay in the current home for up to 60 days after closing, which in many cases is an ideal span of time to find a new home and even close on it by the time you need to move out. This is an attractive option for many because selling your current home and having the proceeds ready to go in your account can add clarity to your home shopping budget and make the process of your new down payment and closing costs much smoother.
If you’re uncertain about how much you’ll earn on the sale of your home and if you can find a buyer who is willing to make this type of agreement, this is a great option! On the other hand, if you’d rather not narrow your buyer pool by asking for a rent back or if you’d feel stressed by the time crunch of having to move after the agreement comes to an end (whether you’ve found and closed on your next home or not), one of the other options may be a better fit.
Bridge Loan
If you’d prefer to access the equity in your current home to help finance the purchase of your next home without a set timeline determined by your buyers, a bridge loan may be a great fit. With a bridge loan, you can borrow equity against your home toward your down payment and closing costs for your new home.
Going the bridge loan route requires that you have enough equity in your current home and adequate income to qualify for the loan, and you’ll need to pay a funding fee. Another cost to consider is the interest on the loan, especially if selling your home takes a long time. Even with these costs, a bridge loan is typically less expensive than a buy before you sell program and gives you the timeline flexibility to shop for your dream home without worrying about a rent back agreement with buyers.
Buy Before You Sell Program
For some, the available equity needed from the current home and the income requirements necessary for a bridge loan to work are a bit out of reach. In those situations, we can explore solutions like the various “buy before you sell” programs that select lenders offer. These programs lean on creative financing to allow you to work on your own timeline as you find your new home while borrowing against what your current home is likely to sell for.
Most buy before you sell programs involve higher fees than bridge loans do, and depending on the program, costs may add up based on the timing of your home purchase and sale. For example, many of these programs include a prepaid line item to cover your current home’s mortgage for 60 days. If you purchase a new home in that time frame but haven’t sold your current one yet, there could be a difficult period when you’re effectively paying two mortgages.
Staying With Family and Friends
The most freedom in terms of timeline and additional costs comes with staying with family or friends. If you’re fortunate enough to have family near your current home or where you’re looking to move, staying with them for a couple of months while you sell and then buy can be an excellent solution. Not only do you skip the fees and additional logistics of the other options, but you also get to spend quality time with your loved ones during this exciting transitional period of your life.
Of course, staying with family or friends isn’t always possible. Whether the idea of living under someone else’s roof makes you cringe or your location restrictions won’t allow for it, this option isn’t the best for every situation. In some areas, short-term rentals and extended stay hotels can serve as a transitional solution while you sell and search for your next home.
We’ve seen each of these solutions in action. There are nuances to each choice, and we’d love to have a more thorough conversation about which solution works best for your circumstances. Reach out to us to talk about your options — we’re at 719-337-7254 or 720-498-9592.
