Buy Before You Sell: Should You Buy or Sell First?

Deciding whether to buy before you sell comes down to one trade-off: certainty versus risk. Buying first gives you the home you want and time to move once, but it can leave you holding two properties, and two sets of costs, until your old home sells. Selling first gives you a known budget and no overlap, but you may need somewhere to live in between. There is no single right answer. The better choice depends on your finances, the state of your local market, and how much risk you are comfortable carrying. This guide walks through both paths so you can weigh up buying before selling your home with your eyes open.

This is general information only. What suits you will depend on your circumstances and each lender’s criteria.

The guidance below draws on the Australian Securities and Investments Commission, known as ASIC, and its MoneySmart service, the government’s independent money guidance.

If you want the lending side mapped out alongside your move, the options come together on our home loans hub.

What buying before you sell actually means

Buying before you sell means signing a contract on your next home while you still own and live in your current one. You commit to the purchase, then sell your existing home afterwards, ideally soon after.

The appeal is straightforward. You are not rushed into a compromise purchase, you only move once, and you avoid renting in between. The catch is the overlap. For a period you may own two homes at once, which can mean two sets of holding costs and, depending on how you fund the gap, a larger debt until the sale settles.

This is the heart of the sell first or buy first question. Selling first answers it by removing the overlap. Buying first accepts the overlap in exchange for a smoother, single move.

Sell first or buy first: the trade-offs

The two paths suit different people. Here is how they compare.

Buying first tends to suit you when the market is moving quickly, when the right home rarely comes up, or when you simply cannot face moving twice. It hands you control over the home you end up in. The cost is uncertainty about your final sale price and the carrying cost of the gap.

Selling first tends to suit you when you want a firm budget before you commit, when you would rather not carry two properties, or when your local market is slow and sales are taking time. It removes guesswork from your borrowing. The cost is that you may need short-term accommodation, and you may feel pressure to buy quickly once the clock starts.

A useful way to read your own situation is to ask which risk you would rather carry: the risk of selling for less than you hoped because you bought first and need the sale done, or the risk of buying in a hurry because you sold first and need a home. Your honest answer points to the path that will keep you calmer through the move.

How people fund buying before selling a home

If you buy before you sell, you need a way to cover the new purchase before the proceeds of your old home arrive. There are a few common approaches.

Some buyers use a long settlement on the new property, negotiating a settlement period long enough to sell the old home first. The contract of sale sets out the settlement period, which is when you have to pay the full purchase price, so a longer one can buy you time. MoneySmart describes the settlement date as the point when the property title is transferred into your name and your mortgage begins. The settlement process explained guide walks through how that day works.

Others draw on equity in their current home, or use savings, to fund the deposit and bridge the gap themselves. Bridging finance is another option some lenders offer, designed to cover the period when you own both homes. Bridging products vary a great deal by lender, and the costs and criteria are specific to each, so any figure should come from your lender in writing rather than a rule of thumb. We have flagged bridging finance here as a concept rather than quoting a rate, because there is no single published figure that applies to every borrower.

Whichever route you take, the size of your deposit and how much you can borrow against the new home shape what is possible. Working out your borrowing power early is a sensible first step.

The costs to plan for when you own two homes

Owning two properties, even briefly, stacks up costs. Plan for them before you commit, not after.

The clearest cost is the deposit on the new home. MoneySmart notes that if you buy at auction, you can expect to pay a deposit immediately, for example 10% of the purchase price, so the cash needs to be ready.

Then there is the question of equity and lenders mortgage insurance. MoneySmart points out that if you have less than 20% equity in your home, you might have to pay lenders mortgage insurance, often shortened to LMI. A great savings goal for a house deposit is 20% of the purchase price, plus enough to cover buying costs, and a 20% deposit avoids needing to pay LMI. If buying first stretches your deposit thin, you could end up paying LMI on the new loan that a larger deposit would have avoided.

The way equity and LMI work is set out in our guides on what LVR means, what lenders mortgage insurance is and how to avoid LMI.

There are the usual upfront costs on the purchase too. Stamp duty is a one-off state government property-transfer tax, and MoneySmart notes you typically need to pay it within 30 days of settlement. On top of that sit building and pest inspections, conveyancing, and moving costs.

Finally, while you hold both homes, you carry the running costs of two properties: two sets of rates, insurance, utilities, and possibly two loan repayments. The longer the gap between buying and selling, the more this adds up.

How to reduce the risk if you buy first

You cannot remove the risk of buying before selling, but you can shrink it.

Get your finances in order before you make an offer. Knowing your borrowing power and your likely sale price narrows the unknowns to a manageable range. When you compare new loans, compare them on the same basis. MoneySmart describes a comparison rate as a single figure of the cost of the loan that includes the interest rate and most fees, which is the honest way to line up offers. Even a small rate gap matters: MoneySmart notes an interest rate even 0.5% lower could save thousands of dollars over time.

Think carefully about the loan structure for a period when your debt may be higher than usual. A fixed rate makes budgeting easier because you know what your repayments will be, but MoneySmart notes it may cost more to switch loans later if you are charged a break fee. A variable rate usually makes it easier to switch loans later if you find a better deal. Which suits you depends on your plans and your lender’s criteria.

Lean on a solicitor or conveyancer for the contracts on both the purchase and the sale. MoneySmart’s view is that getting help from a solicitor or conveyancer to review the contract before signing is the best way to avoid costly mistakes, and that matters even more when two transactions need to line up.

And when you do sell, remember the negotiating point MoneySmart raises for borrowers shopping around: tell your current lender you are planning to switch to a cheaper loan offered by a different lender, which may prompt them to reduce your rate. There can be an interest rate difference of more than 2% in variable home loan rates on the market, so it pays to ask.

Work out the numbers before you decide

Whether you buy first or sell first, the decision rests on figures specific to you: your equity, your likely sale price, the cost of the new home, and the holding costs of any overlap. Getting a borrowing power estimate is a good place to start, because it tells you the budget you are working within before you weigh the two paths against each other.

Use the borrowing power calculator to get an estimate, then read it alongside your current equity and the costs above to see how buying before selling stacks up for you.

Where Finance Lab fits in

Gathering these facts gets the decision on the table. Reading them against your equity, your timing, your local market and a panel of lenders is where it gets personal, and that is where guidance helps. The team at Finance Lab can talk you through whether buying before you sell is workable for your situation, how you might fund the gap, and which lender criteria you may need to meet.

Frequently asked questions