Should I Sell My House Before Buying a New One?

red house for sale sign

With the property market going through a tumultuous phase, you may be wondering how to approach selling your house and buying a new one. The last two years have seen erratic rate changes from lenders and rising Bank of England rates that have left many borrowers concerned about their financial future.

There are some advantages to selling your property before buying your next home. However, there are also significant drawbacks that are often overlooked. In this guide we outline all the pros and cons of selling your house before buying a new one.

Let’s discover everything you need to know about selling your house before buying a new one.

Advantages of Selling Before Buying

When you sell before buying the main advantage is you avoid getting tied up in a property chain unless your buyer has a chain attached to their sale. This could mean you avoid property chains altogether if you have a first-time buyer or someone who has already sold their home and is buying yours at a later point.

According to the latest conveyancing research, 1 in 3 property purchases fall through before contracts are exchanged. For those stuck in property chains this can be catastrophic as it is not only your immediate sale that falls through but everyone further along the chain.

If the chain does not collapse immediately because of a buyer withdrawing from their purchase, it can lead to lengthy delays while a seller in your chain finds a new buyer. With the average conveyancing process taking around 3 months, each time this happens you could find yourself in for a long wait.

Selling your house before buying also affords you the ability to take your time and find a suitable property going forward. When you have a buyer lined up, the time constraints often mean sellers are hurried into making offers on an onward property that may not be as good as if they had time to compare the market and view more properties.

Risks of Selling Before Buying

There are however several risks of selling your home before buying. These are:

  • The requirement to have a place to stay in the meantime
  • The property market changes for the worse
  • Property values tend to increase over time
  • Your life or financial situation may change

When you sell your primary property, you will need to make sure it is vacated at the time agreed when you exchange contracts. Unfortunately, some sellers do not vacate their property in time or do not realise how important this deadline is. Buyers are legally entitled to be in the property at that time and can take you to small claims court for storage, moving costs and inconvenience if they are not allowed access at the exact time.

This means as a seller you will need to be out of your old property and have a place lined up to stay. Most sellers in this situation opt to live with family members. However, some choose to find rented accommodation in the meantime. With rental properties, remember you are likely tied into a set period (normally 12 months), and this can mean you are unable to move beforehand without incurring a financial penalty.

Property Market, Life or Financial Changes

Over time our lives and situations change. Very few people prepared for the current cost-of-living crisis, and many are finding savings pots dwindling and monthly costs rising. If you had sold prior to the cost-of-living crisis expecting to use the proceeds of your sale toward your next property, the price squeeze may have meant you are digging into those savings.

It is a great idea to have an emergency savings account to bridge the gap of any uncertainty that may arise while you are searching for your next property to prevent you dipping into the proceeds of your sale.

Property Prices Tend to Increase Over Time

It can take many months or even over a year to complete on a property purchase and that is once you have had your offer accepted and started the formal process.

If you struggle to find a suitable property in a close timeframe to your sale you might inadvertently find yourself priced out of the property market and have to settle for a cheaper property.

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Tips if You Sell Before Buying

There are a few ways to improve your financial security if you sell before buying.

First you should ensure you have adequate accommodation and storage in place before you sell your home. Remember the sales process can take time and you will need to arrange accommodation on short notice once you have exchanged contracts and know your completion date.

Second, you should make sure any proceeds from the sale are kept securely, ideally in a savings account with a competitive interest rate. Having a good interest rate will help offset some of the damage done by the tendency for property values to rise.

You should also have an emergency fund separate to your sale proceeds set aside. This can be used to mitigate any financial troubles down the line or pay for a rental or storage deposit.
Finally, you should ensure you have discussed your situation with a mortgage broker, so you know the onwards mortgage is obtainable, and you have plenty of options when it comes time to buy your next home.

What Should I Do About My Mortgage

When you sell your existing property, you will need to repay your mortgage in full. Your conveyancers will normally do this for you by deducting the mortgage from the proceeds before it reaches your bank account.

Bear in mind, most lenders have early repayment charges so if you are selling your property during a period where an ERC is applicable you will find a financial penalty attached to the mortgage repayment. Be sure to budget this into your plans before you attempt to sell your property.

What Our Clients Have To Say

Consider Let to Buy

For some borrowers, Let to Buy is a fantastic way of covering costs in the short term as well as securing long term rental income from your existing property.

Let to Buy enables you to convert your current residential mortgage to a Buy to Let mortgage and then take a new residential mortgage on your new property.

Let to Buy will not work if you are looking to wait before buying your next home however because the products are arranged to run concurrently. You would not be able to take that dream cruise for a year then return and take a residential mortgage in the future as part of a Let to Buy.

Speak to a Mortgage Specialist

Selling your property before purchasing a new one is sometimes a necessity. In other cases, it is a choice people make because it suits their current life plans. It is always a complex situation, and you should seek independent advice.

Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Brokerage. Boon Brokers offers fee free mortgage advice and arrangement.

Book your mortgage consultation and discover your sell before buying options today.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.