Should You Stay or Should You Sell?
Buying a home before selling your current one may seem financially impossible, but with the right planning, strategy, and agent by your side at every step, it’s absolutely within reach.
Whether you're relocating, upsizing, downsizing, or simply ready for a change, buying before you sell can give you the ability to move on your terms. And in certain situations, buying your next home before listing your current one can be a move that just makes sense:
- You’ve found the ideal property and don’t want to risk losing it
- You’re moving due to work or a life change and need a seamless transition
- You want to avoid double moves, storage, or temporary housing
- You’d prefer to show your current home vacant and staged
While there are financial considerations involved, the advantages of buying first can include more negotiating power and more control over your timeline. The key is understanding your options and planning ahead of time. At PorchLight, we’re experts at helping clients navigate this transition.
One of our seasoned agents will guide you through each step, and even put you in touch with a reputable professional who can help you secure the financing needed to make it all happen. Most importantly, your agent will help you find and close on your next home—with clarity and confidence.
Financing Options: How to Buy Before You Sell
Here are several effective ways to bridge the gap between buying and selling, along with a quick look at how each strategy works. This is just a broad overview of your options, so be sure to discuss further with a financial professional. It's important to be clear on the pros and cons, as well as the fees and terms.
1. Bridge Loan
This is a short-term loan that allows you to use the equity in your current home to make a down payment on your next one. These loans are designed to be repaid quickly—usually once your existing home sells—or within 6 to 12 months.
- How it works: A lender assesses your home equity and offers a loan based on that value, which you can apply toward your new purchase. Typically, 20% equity is the minimum equity needed to qualify.
- Best for: Those with significant home equity who want fast access to funds before their current home closes and don’t want to make an offer requiring a contingency.
2. Home Equity Line of Credit (HELOC)
Like a bridge loan, a HELOC lets you tap into your home’s equity, but in the form of a revolving credit line. This can be used for a down payment or to cover closing costs and other expenses.
- How it works: You borrow against the equity in your home up to an approved limit, similar to a credit card. The monthly payments are typically interest-only at the start. People often pay off the borrowed amount as soon as they close on their current home.
- Important: You must secure the HELOC before your home is listed for sale, as lenders won’t approve once the property is on the market.
- Best for: Homeowners who want a flexible solution, typically with a lower interest rate than a bridge loan.
3. Cash-Out Refinance
This is another option that taps into your home equity. However, a cash-out refinance replaces your current mortgage with a new, larger one—allowing you to take out the difference in cash. Lenders typically allow cash-out loans of up to 80% of your home's current value, so keep that in mind.
- How it works: You refinance your existing mortgage based on your home’s current value and withdraw a lump sum to use for your next purchase.
- Best for: Those with significant equity in their home and who can plan way ahead of time. Keep in mind that getting a new mortgage takes time to process and requires you to qualify for the loan based on your credit score, debt-to-income ratio, and more.
4. Contingent Offer
A “contingency” is a way to add a term or condition that must be met before a transaction can move forward. With a sale contingency, the sale of the home you want to buy will only proceed if your current home sells first.
- How it works: You submit an offer on your new home that includes a clause stating the purchase is contingent on your current home selling within a set period.
- Best for: Buyers in a less competitive market who want to avoid carrying two mortgages. Flexible sellers can also attract and incentivize more buyers by offering this option as part of the deal.
5. Sell with a Lease-Back Agreement
Technically, this isn't buying before selling, but taking a more conservative approach might be a better fit than getting a loan or line of credit. A lease-back, also called post-closing occupancy, allows you to sell your current home and remain in it temporarily as a renter while you secure your next purchase.
- How it works: You negotiate with the buyer of your current home to remain there as a tenant for a fixed period after closing—usually 30 to 60 days—while paying a daily or monthly rent.
- Best for: Sellers who already have a buyer and need time to find and/or close on their next home.
6. Borrowing from Retirement Accounts
Some buyers choose to temporarily borrow from their 401(k) or IRA to help fund a down payment, but this should be done with caution.
- How it works: You may be able to take out a 401(k) loan and pay your account back with interest. A withdrawal may be possible as well but may come with penalties and taxes. An IRA can be tapped into as well, but also comes with specific rules to follow.
- Best for: Buyers with substantial retirement savings and the ability to borrow funds within rule limits set by the plan. You should also have a strategy to repay or replenish funds.
7. Family Loan or Gift
Family members can help by providing a short-term loan or gift toward the down payment or closing costs.
- How it works: Gifts over a certain threshold must be documented for IRS purposes. If structured as a loan, repayment terms should be clearly outlined in writing.
- Best for: Buyers with financially supportive family and clear communication about expectations.
Common Scenarios
So, how does this work in real life? Here are a couple of quick examples.
Move-Up Buyer Must Act Fast
A family needs more space and finds the perfect home before listing their current one. With strong equity and stable income, they use a bridge loan to secure the purchase, then list their existing home once they’ve moved in. With proper pricing and presentation, the original home sells quickly, allowing them to repay the loan with minimal overlap.
Downsizer Seeking Flexibility
An empty nester couple is downsizing and wants to buy a low-maintenance condo. They sell their home with a 60-day lease-back agreement added to the contract, giving them time to search for the perfect condo and close without the pressure of simultaneous move-out and move-in days.
Timeline Tips: Planning Your Moves Thoughtfully
Buying and selling simultaneously requires careful coordination. Here are a few tips on how to approach the timeline:
- Get pre-approved early so you know what you can afford and which financing tools are available to you. If needed, ask your agent to connect you with a trusted professional.
- Prepare your current home in advance. Even if you don’t list right away, attending to any deferred maintenance or repairs, plus decluttering and cleaning will give you a head start.
- Work with an experienced agent who understands your situation and will proactively manage your sale or negotiate your buying terms to accommodate your needs.
- Have a backup plan in place such as short-term housing or flexible closing timelines, just in case your current home doesn’t sell immediately.
Ready to Get Started?
Buying a home before selling your current one is a realistic option with the right planning and guidance. It’s all about understanding your financial picture, knowing which tools are available, and working with an who can execute the strategy smoothly.
PorchLight has helped numerous clients successfully navigate this transition. Our experienced agents will walk you through the process and even connect you with trusted, reputable lenders who specialize in financing solutions.
Considering a move? Contact PorchLight today for a no-obligation consultation.
