Switching homes
Take the stress out of your next home purchase.
When it’s time to trade up, down or sideways, there are many decisions to make and options to understand. With so many previous client relationships, we are called on to help with this process all the time.
There are several questions that we need to review in order to help simplify and narrow the scope of discussion. Contact us to book a 30 minute strategy call chatwithjim.ca and let’s start to chart the path forward.
A Guide To Selling and Buying Your Next Home
Do you intend to keep your current home as an investment property or sell it to use the equity towards the down payment of the new purchase?
This will determine what down payment we are using, where it is coming from and whether we need to explore your ability to carry both mortgages or just one.
If your mortgage is portable, then one option is to stay with your current lender and transfer or ‘port’ your mortgage to the new property. This avoids a prepayment penalty but you stay with your current rate and renewal date.
If a larger mortgage is required, then new money is added at current rates and you get a blended interest rate and resulting single mortgage payment. This is called a ‘port and blend’
Often it makes sense to break the mortgage, pay the penalty and lock in current rates on the whole mortgage for a full new term. This is one comparison we do when outlining your options and making recommendations. In this case, we can pick the new lender that best fits with your plans and objectives.
No. If the Sale happens on or before the Purchase, then you have equity from the Sale ready as a down payment on the Purchase. If the Purchase happens before the Sale, then you need a Bridge Loan to complete the Purchase.
A Bridge Loan is a short-term loan of the equity in your current home – available when you have a firm Sale Agreement, a firm Purchase Agreement and the Sale property was MLS listed.
A typical bridge loan has a nominal fee and charges interest for each day the money is borrowed. For example, a $250 fee and interest on money borrowed at Prime + 4%.
When the bridge loan amount exceeds a certain amount, for example greater than $150,000, then many lenders require a second mortgage be placed on both properties as additional security until the Sale Closes and the bridge loan is paid off. This can add $1k in legal fees to the overall Bridge Loan expense.
Many people will create the overlap of ownership on purpose so they can complete some minor renovations or painting at the new property – or simply to move in a less frenzied manner.
If you have your down payment for the new purchase – if you are comfortable dealing with tenants – if you have enough household income to carry both properties – then, yes, absolutely.
It’s not uncommon for us to refinance your current home so put a larger down payment on the new purchase. As we move into this strategy, it is all about having sufficient employment income to carry both mortgages.
Ready to Get Started? We are ready to help you with the next steps.
Get started