Are you thinking of upgrading your home in Toronto this year? If so, recent headlines about the real estate market may have you feeling a little nervous. With house prices soaring all over the country, particularly in Toronto, many people feel stuck. Should you move now before prices climb even further? Or hold off and hope things cool down a little?
The only thing anyone knows for sure is that timing is everything when it comes to real estate.
If you play your cards right, buying a new home now doesn’t just give you a bigger place to live. It can be an excellent step to growing your equity and wealth.
The first decision you will have to make is if and when to sell your current home. Do you sell first, then start looking? Or should you buy now, while the market is hot and sell your existing home later?
On paper, this may look like an easy decision. In reality, there are many factors to consider, and each option comes with its advantages and disadvantages. Let’s do a deep dive into both.
The Case for Selling First
When you sell your home, you have a clear picture of your finances. With the proceeds of the sale, combined with your pre-approval from your bank, you know exactly how much you can afford on your new home. You’ll have all the time you need to research your next steps without the weight of mortgage payments to worry about. You can look at multiple homes in different neighbourhoods to determine the best place for you and your family.
Selling first means you don’t run the risk of carrying two mortgages. It also prevents you from overestimating how much you can spend on your new home. Nothing could be worse than moving into a larger house only to find you can’t keep up with the payments!
The Risks of Selling First
The disadvantage to selling first is how quickly the market is moving. House prices are still climbing, and experts predict they will continue to rise. A property you can comfortably afford today may become unattainable if you wait too long.
You can, however, minimize this risk by planning your next steps and having your finances and pre-approval in order so you can move quickly. Now, let’s look at buying first.
The Case for Buying First
If you have significant equity in your home, you might consider buying a new house before selling yours. This seller’s market looks like it’s going to continue for the foreseeable future.
This means that if you want to get the lowest possible price on your new home, the time to lock it in is now. If your finances allow it, you can hold on to your current home as long as you can.
The longer you hold, the more equity you build- on both properties.
If prices continue their expected rise, you will make more money from your sale the longer you hold off. Leveraging your equity like this is how many real estate investors grow their wealth.
The Risks of Buying First
Like any investment, however, there are risks. You may find it difficult to keep up with the payments on two mortgages. In this case, you may be forced to sell one of the properties before you’re ready.
Buying first also carries a degree of uncertainty. You know your house will sell, but you don’t know how fast or for what amount.
And of course, there is the slight risk that the value of your home could decrease. Experts are not perfect and have been wrong before. No one knows for certain what the future will hold.
You can minimize all of these risks with a deep analysis of your finances and by being ready to move fast when an opportunity arises.
Interested in using real estate to grow your equity? Here are two great resources on investing in the Toronto market.
Five Things to Know About Real Estate Investing
Real Estate Investing During Covid19 – To Invest or Not Invest
Before making any decisions, it’s advisable to consult with your real estate agent, who can discuss your best move based on your personal circumstances.
If you are considering an upgrade, you’ll want to maximize the sale of your current home. We are happy to help with staging and other ideas to prepare you for a fast and profitable sale. If you want to know more, or even if you just have questions, Book a Seller’s Meeting Here.
