Buying and selling at the same time: how to manage the overlap

Selling one home and buying another at the same time is common, and it can be stressful. The main problem is timing: you need the money from the sale to complete the purchase.

The short version: align both closings if you can. If not, use a conditional offer, a bridge loan, your equity line or a portable mortgage. Talk to your lender and lawyer before you make an offer.

Your options

• Align both closings on the same day. The simplest, though it depends on two other parties.
• A conditional offer. Your purchase depends on selling your home. It protects you but is less attractive to sellers in a busy market.
• A bridge loan. If your purchase closes first, a bridge loan covers the gap. It is short-term, usually costs more than a regular mortgage and requires proof that your sale is firm.
• A home equity line of credit. Some owners use a HELOC to cover the gap.
• A portable mortgage. It lets you move your current rate and terms to the new home, which can avoid a penalty, though you may need to blend in new money at today's rate.
• Sell first and rent for a short period. It removes the risk but adds moving costs and a second move.

Example

You buy a $800,000 home that closes on May 15 and your own home sells for $650,000 closing on May 30.

• You need a 15-day bridge loan for the $650,000 you will receive later.
• Interest and fees for that short period may be a few hundred to a few thousand dollars.

How a bridge loan works

The lender advances money against your sale, usually secured against both properties, and you repay it from the sale proceeds. Expect a fee and a higher rate than your mortgage, and a requirement that your sale has no outstanding conditions.

Mortgage details to check

• Portability: can you move your mortgage, and what happens to the rate on extra money?
• Penalty: if you break the mortgage when you sell, ask what it will be.
• Qualification: you may need to qualify for both properties for a short time.

A timeline that works

• Before listing, ask your lender about portability and bridge financing.
• Set closing dates with your lawyer, as close together as possible.
• Plan for movers and storage for a day or two.
• Keep a small cash reserve for overlapping costs.

Talk to your lender and lawyer first

Ask about portability, bridge financing and how conditions will work before you make an offer. A little planning avoids a last-minute scramble. In Québec, closing practices differ, so ask your notary.