Selling a house after purchase can relate to various situations, such as buying an existing home or purchasing a new construction home. So, when should you put your current house up for sale, and what's the most suitable timing? Often, the purchase and sale do not seamlessly align. There are several key points to consider, such as the scenario where you face double housing expenses for a certain period or when there's uncertainty about how quickly your home will sell after purchasing a new one.
Selling a House After Purchase: Benefits
Selling your own home after purchasing offers several advantages. This approach allows ample time for potential renovations and the moving process. It's generally advisable to buy first and then sell when it's realistic to assume that your current home will sell quickly. Also, if there's a substantial financial cushion, buying before selling might be an option. However, keep in mind that you might experience a period with double housing expenses in this situation. It's possible that your bank may impose additional requirements, necessitating proof that you can financially manage these dual expenses.
Double Expenses: Bridging Loan
You can apply for a bridging loan to bridge the period of double expenses. This solution comes in handy when you have already moved into your new home while your old one remains unsold. You can use the anticipated equity from your old home to secure a bridging loan. When you sell your old house after purchasing the new one, you can use the proceeds to repay the bridging loan.
Deducting Mortgage Interest on Double Expenses
Double housing expenses may offer tax benefits under certain conditions. You may be eligible for mortgage interest deduction for both homes in the year you vacate your old residence and the following three years. If your old home remains unsold, the second mortgage is then moved to Box 3 for tax purposes. As of that point, the interest on the second mortgage is no longer tax-deductible. On the other hand, your total assets in Box 3 decrease due to the second mortgage.
Moving to Box 3
Transitioning to Box 3 can be beneficial in terms of wealth tax on your assets. However, the current housing market is fast-paced, with homes selling quickly. Therefore, it's unlikely that your old home will remain unsold for long after buying a new one. It's still advisable to consult a professional like Amstelland Makelaars when buying and selling a house, ensuring a successful purchase and sale process.
Tip: Temporary Rental of the Old Property
You can also consider temporarily renting your old home after moving. This can be a suitable solution if you're finding it challenging to sell your house quickly. Keep in mind that mortgage interest is no longer tax-deductible while renting out your old house. Instead, it's moved to Box 3 for income tax purposes. This means you'll be subject to wealth tax on the difference between the property's value and the mortgage. Check whether temporary rental is allowed, as you'll need your mortgage provider's permission. If that's not possible, you can explore renting your property under the Vacant Property Act, which bypasses tenant protection regulations.
Listing Your Own House
After making the purchase, it's essential to secure a clear picture of when your current home will sell. The ideal moment depends on various factors, such as the expected delivery date of your new home. If the delivery date is far off in the future, you have more flexibility, especially when purchasing a newly constructed property. When buying a home, you suddenly own two properties. In the case of a new build, it can be challenging to determine the right time to list your old house as the completion date may be uncertain. The best-case scenario is that the sale of your old property coincides with the completion of your new one. However, this ideal situation is rare. The hot housing market makes it easier to find the right buyer, and it's possible to negotiate a six to nine-month delay between the sale and the handover. But keep in mind that mortgage offers have limited validity for potential buyers.
Real Estate Market Developments
The current state of the housing market is always a factor when deciding when to sell your house after making a purchase. When there's high demand and limited supply, selling your property is more predictable and can allow you to buy first and then sell. In such situations, you can list your home for sale with a favorable transfer timing. Additionally, you may opt to wait until your new home is closer to completion. However, in a reversed housing market, it's not advisable to buy first and then sell. Doing so increases financial uncertainty, especially concerning double housing expenses.
Do you have questions about selling your own house and purchasing another property? Feel free to contact Amstelland Makelaars for detailed information and advice on the ideal timing for your situation.