Buy First or Sell First When Downsizing in Ontario
The hard part of downsizing is often timing, not price. You need the money from your current home to pay for the next one, but you also need somewhere to live when the first sale closes. There are three ways to handle it: sell first, buy first or try to close both on the same day. Each trades certainty against flexibility, and each has costs.
Why timing is the hard part of downsizing
Most downsizers use equity from the larger home to buy the smaller one. That makes the two deals dependent on each other. If the purchase closes first, you may need funds you do not yet have. If the sale closes first, you may be without a home for days or weeks, or you may have to rent or stay with family. The problem is common and the solutions are well known, but each one needs preparation.
Start by working out your numbers. The net proceeds guide shows what comes off the sale price, and the land transfer tax guide shows what you will owe as a buyer. Together they tell you how much cash the purchase will need and how much the sale will leave. If the sale proceeds are essential to the purchase, you are closer to the sell first side of the decision. If you have funds beyond the sale, you have more choices.
None of this is financial or legal advice. The right sequence depends on your mortgage, your savings, your health and your tolerance for risk, and your lender and lawyer see the details.
Selling your home before you buy
Selling first means you list, accept an offer and close, then shop for the next home with the money in hand. It is the simplest sequence to finance. You know your net proceeds, you do not carry two homes, and you can make offers on a smaller home without a condition for the sale of your own.
The cost is the gap. Between your closing and your next one you need somewhere to live and a place for your belongings. Options include renting short term, staying with relatives or negotiating a later closing date on your sale so you have more time to find a home. A later date is a term you ask for in the agreement, and the buyer has to agree to it. A buyer may accept it in return for something else, or may prefer another offer.
Selling first also puts you under some pressure. Once your home is sold, a smaller home that suits you may or may not be available. If the supply in the area you want is thin, a long search can feel urgent. A look at the regions and cities on this site can help you decide where to focus before you list. The guide to clearing out your home helps with storing belongings during a gap.
Buying a smaller home before you sell
Buying first lets you take your time. You find the home you want, move in at your pace and then sell the old one, possibly while it is empty and easy to show. For a downsizer who has a long list of belongings to sort, this can ease the move.
The cost is carrying both homes, at least for a while. That may mean two sets of property tax, utilities and insurance, and the financing needed for the purchase. Your lender decides whether you qualify for the new mortgage while you still carry the old one, and what the lender will accept is different from one lender to the next. Ask for an answer in writing before you make an offer.
It is worth thinking about the risk if your old home takes longer to sell than you planned. A home that sits on the market is expensive to hold. If you cannot cover that, a different sequence may fit better. If the sale price ends up lower than you assumed, the net proceeds are lower too, and so are the funds for the purchase.
Conditional offers and buying with a sale condition
A conditional offer is an offer that depends on stated conditions being met by a deadline. Common examples are financing, a home inspection and, for downsizers, the sale of the buyer's current home. The conditions are written into the agreement of purchase and sale with their dates, and the offer either becomes firm when they are satisfied or ends if they are not.
A condition for the sale of your home protects you, because you are not committed to buying a home you cannot pay for. The seller of the new home sees it differently. They are waiting on a sale that has not happened, so they may prefer an offer without that condition, or they may ask for a short condition period. Whether a seller will accept it depends on how many other buyers are interested, which is something your agent can tell you about the specific home.
The rules for competing offers matter here. RECO's bulletin says a seller's agent must tell each person who has made a written offer how many competing offers there are, and may not share the content of offers unless the seller directs it in writing (RECO Bulletin 4.1). A verbal offer is not counted as a competing offer. If you are making a conditional offer in a contested situation, knowing how many other written offers exist helps you judge your position.
Read every condition and date with your lawyer before signing. This guide explains the idea of a condition, not the exact wording or deadlines in any form, and those details are for your lawyer to confirm.
Bridge financing between two closings
Bridge financing is a short-term loan that covers the gap between the date you must pay for the new home and the date you receive the money from the old one. It is separate from your mortgage. Lenders that offer it usually want to see that your home has been sold, which typically means a copy of the agreement for the sale along with the agreement for the purchase, and the loan is repaid from the proceeds when the sale closes.
The points to ask about are the same ones you would ask about any loan: the interest rate, any fees, the maximum length of the loan, how much you can borrow against the equity in the old home, and whether you must hold your mortgage with the same lender. Terms differ by lender and change over time, and no specific figures were confirmed from an official source for this guide. Ask for a written quote and add the interest and fees to your net proceeds estimate as a cost of the move.
A bridge loan helps most when the sale is firm but closes after the purchase. It does not solve the case where the old home has not sold at all. If you have not sold, the lender is taking on more risk and may not offer it. That is one reason to speak to your lender first, before you make an offer on a new home.
Matching closing dates on both deals
The tidiest answer is to close both on the same day. The money from the sale goes through your lawyer and straight to the purchase, with no bridge loan and no gap. It is possible because closing dates are negotiated in each agreement, and some buyers and sellers are flexible.
It also has risks. Each side of the chain depends on the other. If the buyer of your home needs more time, or the seller of your next home does, the dates no longer match. Having your lawyer review both agreements together makes it easier to see the dependencies. Some people build a few days of overlap into the dates, so that a small delay does not cause a larger problem, and ask for flexibility on possession.
Closing day brings its own list: movers, utilities, keys and a final walk-through. The moving day guide covers it.
Comparing the three sequences side by side
| Sequence | What it gives you | What it can cost you |
|---|---|---|
| Sell first | Known proceeds, no second home to carry | A gap in housing, time pressure to find a home |
| Buy first | Time to choose and move at your pace | Carrying two homes, financing risk if the sale is slow |
| Matching closings | No gap, no bridge loan | A chain that depends on two other parties |
| Conditional purchase | Protection if your home does not sell | An offer that sellers may rank below firm ones |
| Bridge loan | Cash for the purchase before the sale closes | Interest and fees, and a lender's approval |
Choose the row that matches your finances and your patience. A homeowner with a large equity cushion and a paid-off mortgage will find buying first easier. An owner who needs every dollar of the sale will usually find selling first or a conditional purchase safer.
Who to ask, and in what order
Begin with your lender. Ask what you can borrow, whether you can keep or take your current mortgage to the next home, what the penalty would be if you cannot, and whether bridge financing is available. The prepayment rules are described in the net proceeds guide. Then speak to a real estate lawyer, who reviews the agreements and the dates. Then discuss the market with an agent.
Think about deposits as well. The purchase agreement usually requires a deposit before closing, and it comes from your own funds. Ontario.ca notes that registered real estate agents carry deposit insurance, and that consumers may be covered up to $200,000 per claim (Ontario, what to know before buying a home). Ask your lawyer where a deposit will be held.
Also keep the rest of the plan in mind. The condo, townhouse or house guide helps you decide what to buy, and the downsizing guide puts the steps in order. If you are selling a parent's home, the parent guide adds the estate steps.
When you are ready to talk to an agent about timing, contact us. Messages go to agents on the operating team at eXp Realty.
Questions people ask
Should I sell my house before buying a smaller one in Ontario?
It depends on how much risk you can carry. Selling first gives you a known amount of money and a firm date, but you may need somewhere to live in between. Buying first avoids that gap but can leave you owning two homes. Neither is right for everyone, so compare the costs of each against your finances with your lawyer and lender.
What is a conditional offer on a home purchase?
An offer that only becomes binding if stated conditions are met by a set date, such as financing, an inspection or the sale of your current home. The conditions and their deadlines are written into the agreement of purchase and sale. A seller may prefer an offer without conditions, so ask your agent how conditions are likely to be received in your market.
What is bridge financing?
A short-term loan, separate from your mortgage, that covers the gap between paying for the home you are buying and receiving the money from the home you are selling. Lenders commonly ask to see the agreements for both transactions. Terms, rates and fees differ by lender, so ask yours for a written quote before you rely on it.
Can I get the same closing date for my sale and purchase?
Sometimes. Closing dates are negotiated in each agreement, so you can ask for matching dates on both. The buyer of your home and the seller of the next one need to agree, and a delay on one side can affect the other. Have your lawyer review both agreements together and plan for the chance that the dates drift.
Who should I talk to before I choose a sequence?
Your lender, your real estate lawyer and your agent, in that order for most people. The lender tells you what you can borrow and whether bridge financing is available, the lawyer reviews the agreements and the agent explains how buyers in your area treat conditions. Get the answers in writing where you can, before you list or make an offer.
Related guides
- How to Sell a Condo in Ontario: Steps and Status CertificateThe seller-side steps for selling an Ontario condo: the status certificate, condo documents, common expenses, special assessments and closing.
- Preparing an older home for sale in OntarioKnob-and-tube and aluminum wiring, oil tanks, vermiculite, septic systems, wells and heritage designation: what to sort out before listing.
- Seller Disclosure in Ontario: Latent Defects and the SPISWhat an Ontario seller must disclose, the difference between patent and latent defects, the voluntary SPIS and how agency disclosure works.
- Aging in place or moving: an Ontario guideHome care through Ontario Health atHome, retirement homes, long-term care costs and the tax credits that may apply when deciding whether to stay or go.
Questions about downsizing in Ontario?
Write to us and a licensed agent on our team at eXp Realty can reply. Ontario Downsizing is operated by licensed agents affiliated with eXp Realty and is not a brokerage.