How to Use Your Sale Proceeds to Buy Your Next Home

For most Canterbury vendors, the proceeds from their property sale fund the deposit or full purchase of their next home. Coordinating these two transactions smoothly requires advance planning and clear communication between your agent, your solicitor, and your mortgage broker.

Understanding Your Net Proceeds

Your net proceeds are the amount you receive after all deductions at settlement. The settlement statement your solicitor prepares shows: the purchase price (the full amount the buyer paid); minus mortgage discharge (paying out your existing home loan balance); minus real estate commission; minus your solicitor's fees; minus any rates adjustments (rates paid in advance by you are refunded proportionally; rates owed are collected); plus any other adjustments. The result is your net proceeds - the cash that arrives in your account on settlement day. Know this number in advance so you can plan your next purchase deposit and remaining mortgage with your mortgage broker.

Coordinating Settlement Dates

The most common complication in a buy-sell sequence is misaligned settlement dates. If you are selling and buying simultaneously, you ideally want your sale to settle at least one or two days before your purchase settles. This ensures your sale proceeds are cleared and available before your purchase settlement is due. Negotiate settlement dates in both your sale and purchase agreements to achieve this sequence. Your solicitor can coordinate with both sets of lawyers to ensure funds flow correctly. If your purchase settles before your sale, you may need bridging finance to cover the gap.

Bridging Finance

Bridging finance allows you to complete your purchase using borrowed funds before your sale settles. It is more expensive than standard mortgage lending and requires strong equity and income to qualify. Canterbury borrowers should note that from 1 July 2024, bridging finance is exempt from DTI restrictions - meaning the DTI limit does not apply to bridging loans, which is a useful flexibility for those managing a simultaneous buy-sell sequence. Confirm bridging finance eligibility with your mortgage broker well in advance, not at the last minute.

What Your Solicitor Manages

Your solicitor handles the financial choreography of your simultaneous sale and purchase. They ensure sale proceeds are received before purchase funds are due, calculate all adjustments for both transactions, and manage the trust account timing. Brief your solicitor early about your intentions to sell and purchase simultaneously so they can plan the coordination of both transactions from the start.

For general information only. Always consult a qualified mortgage adviser and solicitor before making decisions about simultaneous sale and purchase transactions.