How to avoid paying a double mortgage when buying a new home

Purchasing a new home while still owning your current property can be financially challenging, especially if you need to manage two mortgages simultaneously. To avoid paying a double mortgage, consider the following strategies:

1. Sell your current home before buying a new one

The most straightforward way to avoid paying two mortgages is to sell your existing home before purchasing a new one. This ensures you only have one mortgage to manage at any given time.

a. Key benefits:

• Eliminates the risk of carrying two mortgage payments.
• Provides a clear budget for your new home purchase.
• Potentially increases your purchasing power with the equity from the sale.

b. Practical steps:

• Work with a real estate agent to time the sale of your current home.
• Consider renting temporarily if you need more time to find your new home.
• Ensure your home is well-prepared and priced competitively for a quick sale.

2. Use a bridging loan

A bridging loan is a short-term loan that can help cover the gap between buying a new home and selling your current one. This type of loan can prevent the need for paying two mortgages simultaneously.

a. Key benefits:

• Provides financial flexibility to purchase a new home before selling the old one.
• Can be structured to cover interest payments, easing cash flow concerns.
• Typically has a term of 6 to 12 months, allowing ample time to sell your current home.

b. Practical steps:

• Consult with a mortgage broker to understand the terms and conditions of bridging loans.
• Apply online with Funding.
• Ensure you have a realistic plan for selling your current home within the loan term.
• Compare different lenders to find the best bridging loan rates and terms.

3. Rent out your current home

If selling your current home immediately is not feasible, consider renting it out. The rental income can help cover your existing mortgage payments while you transition to your new home.

a. Key benefits:

• Generates income to offset mortgage payments on your current home.
• Provides more time to sell your home without financial pressure.
• Potentially allows you to benefit from property value appreciation over time.

b. Practical steps:

• Research the rental market in your area to determine a competitive rental rate.
• Hire a property management company if you prefer a hands-off approach.
• Ensure your property is in good condition to attract reliable tenants.

4. Negotiate a longer settlement period

Negotiating a longer settlement period on the purchase of your new home can provide additional time to sell your current home, reducing the overlap between mortgage payments.

a. Key benefits:

• Provides more time to sell your current home without rushing.
• Reduces the likelihood of having to manage two mortgages simultaneously.
• Allows for a smoother transition between properties.

b. Practical steps:

• Discuss your needs with your real estate agent and convey them to the seller.
• Be prepared to offer incentives to the seller, such as a higher purchase price or flexible terms.
• Use the extended period to actively market and sell your current home.

5. Explore home swap options

In some cases, you may be able to find a home swap arrangement where you and another homeowner trade properties. This can eliminate the need to manage two mortgages.

a. Key benefits:

• Simplifies the buying and selling process by consolidating transactions.
• Eliminates the financial burden of paying two mortgages.
• Provides a direct and potentially faster solution for moving into a new home.

b. Practical steps:

• Look for home swap programs or platforms that facilitate these arrangements.
• Work with a real estate agent experienced in home swaps.
• Ensure all legal and financial aspects are thoroughly addressed in the swap agreement.

Ho to avoida a double mortgage

Consider a family in Bendigo looking to upgrade to a larger home while still owning their current property. They decide to use a bridging loan to purchase the new home. Their mortgage broker helps them secure a bridging loan with a 9-month term, giving them ample time to sell their current home. They list their current home for sale and actively market it, ensuring it is priced competitively. Within six months, they successfully sell their current home, repay the bridging loan, and seamlessly transition to their new property without the burden of paying two mortgages simultaneously.

By following these strategies, you can effectively avoid paying a double mortgage when buying a new home, ensuring a smoother and more financially manageable transition between properties.