Are you dreaming of a new home but worried about selling your old one at the same time? You're not alone. This complex process involves financial and time challenges that require careful planning.
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The topic briefly and concisely
The safest strategy is to sell the old property first to use the proceeds as equity for the new purchase and avoid an expensive interim financing.
A bridging loan covers the capital gap, but costs significantly more than a conventional loan due to interest surcharges of 1-5%.
The speculation tax on the sale profit is waived if more than 10 years have passed between purchase and sale, or if the property was used by the owner in the year of sale and the two preceding years.
Buying a new house and selling the old one is one of the biggest financial decisions in life. The biggest challenge is the timing and financial coordination of both transactions. Without a well-thought-out strategy, you risk expensive interim financing or selling your old property below value. This guide shows you how to master the process step by step, from the correct order and financing to avoiding tax pitfalls. This ensures that the dream of a new home does not become a financial nightmare.
The strategic decision: Sell first or buy first?
The ideal sequence to minimise financial risks is clear: first sell the old house, then use the proceeds to buy the new one. This approach saves you from costly interim financing in most cases. However, in a fast-paced buyer's market, this method could mean missing out on your dream home because you're not ready to act immediately. Therefore, a thorough neutral valuation of your current property is the first step to realistically assess your bargaining position and budget.
The alternative – buying first – provides security with the new property but requires an absolutely solid financing strategy. Banks often require proof of at least 20% equity for the new financing, which is often still tied up in the old property. This is where specialised financing instruments come into play to bridge this gap. Without such a solution, buying before selling is hardly feasible for most owners. The decision thus strongly depends on your risk appetite and the current market situation.
The financing plan: How to cleverly close the capital gap
If the proceeds from the sale of your old house are not yet available, you will need bridge financing to pay for the new property. This bridge loan is typically granted for a term of up to 24 months. The bank uses your old, not yet sold property as collateral. The advantage: The capital from the bridge financing is classified by the bank as equity for the new home loan, which can secure you better terms for subsequent financing.
However, this flexibility comes at a price. For bridge financing, banks often demand an interest premium of 1 to 5 percentage points above the regular construction interest rate. This compensates the bank's risk if the sale of your old property takes longer or achieves a lower return than expected. Another option is a so-called collateral or property transfer, where the existing loan is transferred to the new property. The following options are available:
Bridge Financing: A short-term loan that is repaid by the later sale proceeds.
Variable Loan: Offers flexibility but carries interest rate change risks.
Collateral Transfer: Transfer of the existing loan to the new property.
Buyer's Down Payment: An early down payment can reduce the financing gap.
Choosing the right instrument requires a careful analysis of your financial situation and the expected timing of the sale.
Double Duty: Keep an Eye on Buying and Selling Ancillary Costs
Many owners underestimate the total costs, as significant additional costs arise both when selling the old property and buying the new one. For the purchase alone, you should expect ancillary costs of 5 to 13 percent of the purchase price, depending on the state. This sum covers the property transfer tax, notary fees, and land registry costs. For a purchase price of 450,000 euros, these costs can quickly add up to over 52,000 euros.
The property transfer tax is the largest item and varies significantly between the federal states – from 3.5% in Bavaria to 6.5% in North Rhine-Westphalia or Thuringia. In addition, notary and land registry costs amount to around 1.5 to 2.0% of the purchase price. If an estate agent is involved, the buyer and seller usually share the commission, which can mean additional costs for you as a seller of up to 3.57% of the sale price. An exact list of all important sales documents and costs is essential.
Avoiding Tax Pitfalls: The Speculation Period as a Key Factor
An often overlooked cost factor is the speculation tax. If you make a profit from the sale of your old property, you may be required to pay tax on it. This applies if the period between the purchase and sale date is less than ten years (speculation period). The amount of tax is determined by your personal income tax rate and can significantly reduce the sale proceeds. For a taxable profit of 90,000 euros and a tax rate of 20 percent, that would be 18,000 euros.
However, there is an important exception to this 10-year period. If you have exclusively occupied the property yourself during the year of the sale and the two preceding calendar years, the speculation tax does not apply. Continuous use over three full years is not necessary; it suffices to have used the property throughout the calendar years 2023, 2024, and for one day in January 2025, to sell tax-free in 2025. A precise examination of these periods is crucial to avoid unnecessary tax payments and to minimise the risks when selling a house.
Foundation of Success: Why an Accurate Valuation is Essential
The entire process – whether you sell or buy first, which financing you choose, and what your budget for the new house is – depends on a single key figure: the realistic market value of your current property. An error in estimation of just 10% can jeopardise your entire financing strategy. If you set the value too high, you won't find a buyer and can come under time pressure with bridging finance. Set it too low, and you give away equity that you need for the new purchase.
A data-driven, neutral valuation is therefore not an option but a necessity. It forms the basis for discussions with the bank and gives you planning security. Do you want to know what capital is really tied up in your property? The ImmoGPT chat from Auctoa provides you with a first, AI-supported assessment in just 2 minutes. For a detailed analysis and a well-founded sales strategy, a professional valuation is the next step. This ensures that your plan to buy a new house and sell the old one is built on a solid foundation.
Conclusion: Strategic planning for a successful property change
The simultaneous purchase of a new property and sale of an old one is a complex operation that can quickly lead to financial bottlenecks without careful preparation. The key to success lies in realistic time and financial planning, based on an accurate valuation of your existing property. Weigh up the pros and cons of the sequence – buying before selling – carefully and secure your financing early. Consider all additional costs and tax deadlines to maximize your profit. A well-planned property change is not a gamble, but the result of a smart strategy.
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Additional useful links
The Federal Statistical Office (Destatis) offers detailed data on construction prices and the property price index, which are essential for a realistic market assessment.
The German Central Bank provides a comprehensive indicator system for the residential property market, offering important insights into market developments.
The Federal Ministry of Finance provides extensive information on property tax and land transfer tax, key cost factors when buying and selling property.
The KfW offers funding programmes for the construction of new properties, which can aid in financing.
The KfW also provides funding for the purchase or renovation of existing properties.
The German Energy Agency (dena) provides comprehensive information on the energy certificate, which is often required when selling a property.
The Banking Association explains what needs to be considered during a creditworthiness check, a crucial step in property financing.
The Consumer Advice Centre offers independent information and advice on construction and property financing to support consumers.
FAQ
Can I transfer my old mortgage to the new house?
Yes, this is possible under certain circumstances through what is known as collateral or object exchange. However, your bank must agree to this approach. In this process, your existing loan agreement is reassigned to the new property as security. This can be advantageous if you are still benefiting from low interest rates from an old contract.
What happens if I don't manage to sell my old house in time?
This is the main risk when you buy first. Bridging finance has a fixed term (e.g., 24 months). If this expires before you have sold, you will need to seek expensive follow-up finance or face pressure to sell, which often results in a lower sale price. Therefore, a realistic appraisal and a buffer in the schedule are crucial.
How do I calculate the 3-year period for owner-occupation in relation to speculation tax?
The rule is advantageous for sellers. It doesn't have to be a full 36 months. It's sufficient if you have lived in the property for the entire calendar year before the year of sale, the entire calendar year before that, and at least for part of the year of sale itself. Example: Sale in February 2025, continuous personal use in 2024 and 2023.
Should I hire the same agent for selling and buying?
This can have advantages. An agent who handles both transactions can better coordinate the schedule and has a strong interest in ensuring that both deals run smoothly. Often, better commission terms can also be negotiated in this way. More important, however, is the agent's expertise in the respective local markets.
What documents do I need to provide the bank for bridge financing?
The bank requires detailed information about both properties. For the property to be sold, this includes the land register excerpt, a realistic valuation (often by an appraiser), photos, and an estimate of the expected sales proceeds. For the new property, you need the purchase offer or draft contract, as well as the usual credit documents.
Can I deduct the ancillary costs from my taxes?
For a property used purely for private purposes, you cannot claim the additional purchase costs (such as property transfer tax, notary fees, etc.) for tax purposes. The situation changes if you rent out the property or claim a home office for tax deduction. In this case, the acquisition incidental costs can be depreciated over the years.
