Timing Your Mortgage
After a bit of a slow start to the year, the spring market is in full swing. For many clients it’s a bit of a chicken and egg game. Do I list my current home for sale first? Or do I write an offer on a home I want to buy, then list my home? When is the best time to move? And how do I move out of one home and into the new one, all in one day??
It all depends.
Working with a knowledgeable realtor and mortgage broker is key to maintaining your sanity.
In a previous column I talked about porting your mortgage (insert https://www.okanaganmortgages.com/porting-your-mortgage/ ) from one home to another. Did you know that in many cases you can complete the purchase of your new home a few days before the sale completes on your current home? This is known as bridging your mortgage.
I will talk about bridging a little later.
With respect to the timing question, the answer will vary based on the reason that you are moving. If you have transferred for work in another community and are relocating, you will likely list your current home before you venture out house hunting in your new community.
There are considerations that may affect this. If you have children in school and they are close to the end of the school year, you may want to hold off on selling your home for a short time if the whole family is not moving together.
If you are close to the beginning of a new school year, you will more likely want to find a home and relocate your family as quickly as possible.
If an offer does come in on your home, you can try to negotiate with the buyers to find a date that works for your family.
Maybe your dream home came up for sale unexpectedly. Maybe you have decided to upsize or downsize your home. Maybe you have found yourself in the position of needing something more accessible because of changes in your health.
In an ideal world, the stars align and your current home sells quickly. Reality doesn’t always play out that way.
Sometimes your home takes a while to sell. Sometimes your home sells a lot quicker than you anticipate.
So what if you’ve found a new home you love? Sellers are generally more interested in offers that are not subject to the sale of another house.
If you write an offer on a home and it is subject to the sale of your current home, most realtors will include a time clause (generally a 48-hour time frame). A time clause means that if another suitable offer comes in on the home, the sellers will give you notice that you have 48 hours to make your offer firm and binding, or the second offer bumps yours.
On the flip side, what if you are looking to make a change but have not found a new home yet and you get an offer on your home?
I have seen some offers where the sellers include a clause that gives them a time frame to find a new home. Generally this lines up with the time frame allowed for the purchasers to remove their subjects.
So where does bridge financing (bridging) enter into the conversation?
Once you have a firm sale on your home, many lenders have programs that allow you to arrange bridge financing so that you can purchase your new home before your original home sells.
Different lenders have different programs and criteria. As an example, let’s say you’ve accepted an offer on your home that closes on June 30. The purchasers have removed all of their conditions, so you have a firm and binding sale.
You found an amazing home but would really like a couple of weeks in the new house to do some painting and renovate the bathroom before you actually move in.
Based on the firm sale of your house, your lender will likely be able to offer bridge financing so you can complete the sale on the new property a couple of weeks before your sale is finalized.
The lender essentially advances the money you need for your down payment and finalizes your new mortgage. Your lawyer will draw up all of the documentation. Most lenders offer bridge financing for a nominal administration fee (~$250 / $350) and charge daily interest on the money you need for your down payment.
In some cases you need to pay out additional bills (credit cards or loans) for the new mortgage to work. Some lenders will also arrange for this as part of the bridge financing.
Bridge financing can also be a great option if you have a lot to move and a small moving crew. Bridging to own the new house a few days ahead of time will allow you time to move and thoroughly clean the house you’ve just sold without dropping from exhaustion because you’ve packed this all into a day.
We’ve bounced around a bit here, but the key takeaway is that every client is unique. If you are trying to sort out the timing of your move. working with experienced professionals can help you identify ways to accomplish a smooth move.