Real Estate

Questions about the process of buying a new home and selling my current home

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  • Feb 15th, 2021 4:21 pm
[OP]
Jr. Member
Mar 14, 2018
128 posts
201 upvotes

Questions about the process of buying a new home and selling my current home

We are looking to buy a bigger place sometime in the next 12 months. I had a few questions about the process of buying a new home and selling our current home. Assuming that it will be a seller's market, we will likely decide to buy first (our current condo should be a quick sale looking at the comparables). Also, we will need the equity from our current home to make the downpayment. Given this situation, I have a few questions if I decide to go with a new lender for the new home:

1. Would the new lender pre-approve the mortgage considering that our downpayment would consist of the proceeds from the sale of my current home? Would this require any appraisal of my current home?

2. Will the new lender be able to offer a bridge loan even though I'm switching?

3. Do I need to arrange anything with my current lender (or broker) beforehand? Or, will my lawyer take care of everything when closing the sale and discharging our current mortgage?

Thanks.
7 replies
Deal Addict
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Jan 2, 2012
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clutch31 wrote: We are looking to buy a bigger place sometime in the next 12 months. I had a few questions about the process of buying a new home and selling our current home. Assuming that it will be a seller's market, we will likely decide to buy first (our current condo should be a quick sale looking at the comparables). Also, we will need the equity from our current home to make the downpayment. Given this situation, I have a few questions if I decide to go with a new lender for the new home:
If you go with a new lender, you'll of course have to the pay the cancellation penalty to your current lender unless your renewal happens to come up around the same time.
1. Would the new lender pre-approve the mortgage considering that our downpayment would consist of the proceeds from the sale of my current home? Would this require any appraisal of my current home?
No, the new lender won't care what your current home is worth, they are only interested in your new home, mortgage required and down payment amount. It's up to you to determine current home value, and what proceeds you'll end up with for down payment on your new home. If you don't get as much as you think, you'll need to come up with the rest of the funds some other way.
2. Will the new lender be able to offer a bridge loan even though I'm switching?
Most lenders offer bridge financing, regardless if you're switching lenders or not. Some smaller lenders may not so you'll need to confirm this in advance.

For bridge financing all you need is a firm (so all conditions waived) offer on your current home, before your new home purchase closes.
3. Do I need to arrange anything with my current lender (or broker) beforehand? Or, will my lawyer take care of everything when closing the sale and discharging our current mortgage?
The new lender will request the buyout amount from your current lender which should include all cancellation penalties and discharge costs. When the closing date comes to sell your current place, they'll pay out the balance to your current lender.

Make sure you check how much of the cancellation/discharge fees the new lender will pay.

Lawyer will do all the rest.
[OP]
Jr. Member
Mar 14, 2018
128 posts
201 upvotes
rob444 wrote: If you go with a new lender, you'll of course have to the pay the cancellation penalty to your current lender unless your renewal happens to come up around the same time.


No, the new lender won't care what your current home is worth, they are only interested in your new home, mortgage required and down payment amount. It's up to you to determine current home value, and what proceeds you'll end up with for down payment on your new home. If you don't get as much as you think, you'll need to come up with the rest of the funds some other way.


Most lenders offer bridge financing, regardless if you're switching lenders or not. Some smaller lenders may not so you'll need to confirm this in advance.

For bridge financing all you need is a firm (so all conditions waived) offer on your current home, before your new home purchase closes.


The new lender will request the buyout amount from your current lender which should include all cancellation penalties and discharge costs. When the closing date comes to sell your current place, they'll pay out the balance to your current lender.

Make sure you check how much of the cancellation/discharge fees the new lender will pay.

Lawyer will do all the rest.
Thanks for the detailed response! Yes, we are budgeting the cancellation penalties. My current rate is relatively too high (2.99% fixed) so I don't think porting the mortgage with the same lender makes sense for us...
Deal Addict
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Jan 2, 2012
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clutch31 wrote: Thanks for the detailed response! Yes, we are budgeting the cancellation penalties. My current rate is relatively too high (2.99% fixed) so I don't think porting the mortgage with the same lender makes sense for us...
Have you already asked the lender what penalties will be? For fixed rate the IRD can be quite high, just make sure you'll recover the difference quicker than the term left on your mortgage.
Deal Addict
Jul 11, 2010
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Before listing, I would have a frank discussion with a realtor to see if your condo should sell quickly. In this time of COVID what should happen and what does happen are 2 different things. How many condos similar to yours are up for sale your area, how many days have they been on the market etc. You don't want to take risk of buying a new place and your current home is not selling. It happens.
Doug Boswell
intelliMortgage Inc. Brokerage #12326
FSRA #MO09002332
[OP]
Jr. Member
Mar 14, 2018
128 posts
201 upvotes
dougboswell wrote: Before listing, I would have a frank discussion with a realtor to see if your condo should sell quickly. In this time of COVID what should happen and what does happen are 2 different things. How many condos similar to yours are up for sale your area, how many days have they been on the market etc. You don't want to take risk of buying a new place and your current home is not selling. It happens.
Thanks for the tip. Our condo is a 1+1 in NY and it seems to be in continuous demand. I've looked up sales for past 90 days in our building for the same size units and days on market were like 1-15 days. We won't start looking until April so we will see how the market is at that point.
[OP]
Jr. Member
Mar 14, 2018
128 posts
201 upvotes
rob444 wrote: Have you already asked the lender what penalties will be? For fixed rate the IRD can be quite high, just make sure you'll recover the difference quicker than the term left on your mortgage.
I'm with DUCA/Paradigm and they have an online tool. It will be about $2400 + discharge fees at the moment, but it was a lot higher ($~9000) a month ago when their posted rates were lower. Even with the latter case, I think the penalty will be less than 2 years' worth of interest saving with the lower mortgage rates now and a much bigger mortgage we will be getting for the new home.
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Jan 2, 2012
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clutch31 wrote:
Thanks for the tip. Our condo is a 1+1 in NY and it seems to be in continuous demand. I've looked up sales for past 90 days in our building for the same size units and days on market were like 1-15 days. We won't start looking until April so we will see how the market is at that point.
I've done this several times (bought first, then sell) and it's never been a big deal. In the GTA i've always found buying is much more difficult and time consuming than selling, especially if you're looking for a home with some specific requirements vs a cookie cutter condo. Just remember to try and get as long a closing date as possible (60 - 90 days) when buying your new home, to give you ample time to sell your current place. Also be realistic on the price as you may not have time to hold out for the best deal possible.

All you need is a firm offer on your current home to qualify for bridge financing, and you're generally in the clear.
clutch31 wrote: I'm with DUCA/Paradigm and they have an online tool. It will be about $2400 + discharge fees at the moment, but it was a lot higher ($~9000) a month ago when their posted rates were lower. Even with the latter case, I think the penalty will be less than 2 years' worth of interest saving with the lower mortgage rates now and a much bigger mortgage we will be getting for the new home.
Keep in mind even if you stay with current lender, the new amount of mortgage you want to add on should be added at today's market interest rate. So you would end up with a blended rate for your new larger mortgage.

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