Changing Your Primary Residence: Sell Before Buying or Vice Versa?

Are you a property owner considering selling your primary residence to purchase a new one? The reasons can vary: career changes, family developments, or simply the desire for a fresh start. This situation affects many people, who naturally have questions about the practical and financial aspects of this project.

Is it too early to sell your primary residence? Should you wait until you have paid off a larger portion of your mortgage? What impact will this decision have on your taxes? We address these crucial questions to help you get a clearer picture.

When is it advisable to sell your primary residence?

In theory, there is no strict rule regarding when you can sell your primary residence to acquire a new one. However, it is generally accepted that it is better to wait at least five years to amortize the main costs associated with your investment. If your personal situation does not allow you to wait, do not hesitate to seek the help of real estate experts to optimize your choices.

If you sell earlier than planned, you may not have had the time to amortize notary fees, agency fees, mortgage insurance, and any repair, renovation, and maintenance costs. This is why it is often considered that you "lose money" in this scenario.

Taxation and mortgages: essential information you need to know

Selling before buying: pros and cons

If you sell your primary residence before buying a new one, you will have capital available that will facilitate the purchase of your future home. This approach also avoids having to temporarily bear the costs associated with owning two properties.

However, this option involves finding a temporary housing solution before becoming the owner of your new primary residence.

Is buying before selling more advantageous?

Acquiring a new property before selling your current primary residence gives you more time to organize your move. For example, if renovations are needed, you can carry them out without having to live in a construction zone. This strategy also avoids the search for temporary rental housing between the sale of your first primary residence and the purchase of the new one.

However, this solution carries additional risks. In fact, as long as you have not sold your current property, you do not know how much it will yield, and the amount obtained might not meet your expectations. Furthermore, you might need an additional loan to finance the purchase of the new home, as you will not yet have received the capital from the sale of your old primary residence.

What is the impact on my taxes?

When you sell your primary residence to acquire a new one, you must declare this transaction to the tax authorities. The tax treatment varies depending on the holding period of your property: more or less than 2 years. If you have owned the property for more than two years, you may be eligible for a full exemption from real estate capital gains tax. Conversely, if you have owned the property for less than two years, the exemption does not apply, and you will have to pay taxes on the capital gain realized during the sale.

In conclusion, the decision to sell your primary residence to buy another depends on many factors, such as the property's holding period, your financial situation, your housing needs, and real estate market conditions. It is essential to take the time to evaluate the pros and cons of each option and to consult real estate experts to guide you through this process.