How To Finance a New Home Before Selling Your Current One

By Nick Garcia

Nick Garcia navigates the complexities of the mortgage industry with analytical precision and strategic foresight. As President and Chief Lending Strategist at Smarter Lending, his mission is to make homeownership accessible and financially sensible for individuals with intricate financial situations.

Buying a new home before selling your current one might seem daunting, but with the right financial strategy, it’s absolutely possible. The key is understanding your options and knowing how to avoid getting stuck with two mortgage payments for too long. If you’re considering making a move, here are a few strategies to explore:

Option 1: Bridge loans. One common way to buy before selling is through a bridge loan. This short-term loan provides the cash needed to purchase your new home before your current home sells, allowing you to make a competitive offer without a home sale contingency. The advantage of a bridge loan is that it offers temporary financing while you wait for your home to sell, providing you with flexibility in the home-buying process.

However, bridge loans come with higher interest rates than traditional loans, and they must be repaid quickly, typically within six to twelve months. Additionally, they require strong financial standing to qualify, making them a good option only for those confident in selling their home within a short timeframe.

Option 2: Home equity loans & HELOCs. If you have equity in your current home, tapping into it through a Home Equity Loan or a Home Equity Line of Credit (HELOC) might be a smart option. A Home Equity Loan allows you to borrow a lump sum based on your home’s equity, while a HELOC works more like a credit card, giving you the flexibility to withdraw funds as needed. The benefit of these loans is that they usually come with lower interest rates than bridge loans, and you can use the funds for a down payment or other home-buying expenses.

On the downside, even if your home doesn’t sell quickly, you’re still responsible for repaying the loan. Additionally, using your home’s equity reduces the amount of profit you’ll make when you eventually sell your property. This option works well if you need liquidity to make your next move, but be mindful of the risks involved in tapping into your home’s value.

Option 3: Alternative lending programs. Some lenders and real estate companies offer unique programs that help homeowners buy before selling. Companies like Flyhomes, Orchard, and Knock offer services that let you purchase your next home first, with the promise of helping you sell your existing home later. In addition, some mortgage lenders offer special programs that take into account your expected home sale proceeds, easing the immediate financial burden.

These programs provide more flexibility in your home search and reduce the stress of trying to perfectly time both transactions. However, they may involve additional fees or conditions, and if you opt for a fast-sale program like an iBuyer, you might not get top dollar for your current home. That said, if you want a seamless transition, these options could be a game-changer.

Financing a new home before selling your current one is definitely achievable, but it requires careful planning. The best strategy for you depends on your financial situation, the current market conditions, and your timeline. If you’re considering this move, I’d love to help you explore your best loan options and create a financial plan tailored to your situation. Schedule a call today, and let’s take the next step toward securing your next home.