When Relocating in Sendai: Should You Sell or Buy First? Financial Planning to Avoid Double Loans

Basics of Relocation: Differences Between Selling First and Buying First

When considering a relocation in Sendai, many people face the question of "Should I sell my current home first, or decide on my new residence first?" This order greatly influences the success or failure of the relocation.

Selling first is the method of selling your current home before purchasing a new residence. Since you can secure the sales proceeds before moving forward, financial planning becomes easier and the risk of double loans can be avoided.

Buying first is the method of purchasing and contracting for a new residence before selling your current home. While you can secure your ideal property without losing it, there is a risk of carrying two mortgage loans simultaneously during the period until the sale is completed.

Which is the right choice depends on financial capacity, lifestyle, and market conditions, but generally, selling first is considered safer when you don't have significant financial room to maneuver.

What is a Double Loan? Why is it Dangerous?

A double loan refers to obtaining a mortgage for a new residence while still having a balance on the mortgage for your previous home. Since monthly repayment amounts essentially double, the risk of straining household finances increases significantly.

For example, if your previous home's remaining loan balance is 20 million yen with monthly payments of 80,000 yen, and your new home's loan is 35 million yen with monthly payments of 120,000 yen, you'll continue paying 200,000 yen per month until the sale is completed. Even for dual-income households with stable income, this is a substantial burden.

In Sendai, selling an apartment or house typically takes an average of 3 to 6 months. If double loans continue during this period, the impact on household finances can be severe. Additionally, some financial institutions view new loan applications strictly when existing loans are present, which may make it harder to obtain financing.

Advantages and Disadvantages of Selling First

Advantages

Certainty of financial planning: Since you move after the sales proceeds are confirmed, you can set an accurate budget for your new home. Even if the sales price is lower than expected, you can select a property that matches the actual amount.

Easier loan approval: Since you apply for a new home loan after the previous home's loan is fully paid off, the financial institution's approval process proceeds favorably.

Peace of mind: You can search for a new home calmly without the anxiety of double loans.

Disadvantages

Temporary housing may be required: If the sale of your previous home is completed before you find a new home, you may need temporary housing. When securing temporary housing within Sendai, you'll incur additional rent and moving expenses.

Risk of losing your desired property: While you're selecting a new home, other buyers may beat you to it. Popular areas in Sendai and properties with good conditions are often sold quickly, creating situations where you can't take your time selecting.

Advantages and Disadvantages of Buying First

Advantages

Ability to secure your ideal property: Since you can secure a property you like before moving forward, you can achieve a relocation without compromise more easily.

Only one move: Since you vacate your previous home after securing your new one, you don't need temporary housing and can reduce moving costs.

Disadvantages

Risk of double loans: If the sale of your previous home is prolonged, the period of carrying two loans simultaneously extends. Even for households with sufficient income, the psychological and financial pressure is considerable.

Price reduction due to hasty selling: The urgency to sell quickly can result in selling below market price.

Relocation Timing from the Perspective of Sendai's Market Environment

The Sendai real estate market is experiencing strong both sell and purchase demand from 2024 to 2026. Particularly in high-accessibility areas such as Aoba Ward and Miyagino Ward, properties listed on the market tend to be sold relatively quickly.

In such a market environment, even with a sell-first strategy, the temporary housing period may be short. Conversely, suburban or older properties may take longer to sell, so it's important to plan with ample time.

Sale period estimates (within Sendai)

Based on these estimates, it's important to calculate temporary housing costs and double loan periods to create a financial plan.

How to Create a Financial Plan: Concrete Steps

Step 1: Determine Your Previous Home's Appraisal Value

The starting point for relocation is to understand what your current home is worth. Request appraisals from multiple real estate companies to understand the appropriate price range. Real estate companies in Sendai offer free appraisals.

Step 2: Confirm Mortgage Balance and Various Expenses

Confirm the remaining mortgage balance on your previous home and calculate the difference with the sales proceeds. If the sales proceeds exceed the mortgage balance, it's a "positive relocation"; if not, it's a "negative relocation," which requires supplementing with your own funds. Also include agent commissions, registration fees, and moving expenses in your calculation.

Step 3: Set Your New Home Budget

Use your net sales proceeds from your previous home (sales price − remaining mortgage − expenses) as a down payment, then set a purchase budget for your new home considering loan approval criteria and repayment ratios. Generally, most people use annual income multiplied by 6-7 times as a guideline for borrowing.

Step 4: Include Temporary Housing Costs in Your Estimate

With a sell-first strategy, temporary housing may be necessary. The average cost for 1LDK temporary housing in Sendai is around 50,000-80,000 yen per month. If you assume 3 months of temporary housing, include 150,000-240,000 yen in additional costs in your plan.

Utilizing Relocation Loans and Bridge Financing

To mitigate the risk of double loans, there are financial products such as "relocation loans (replacement loans)" and "bridge financing."

Relocation loans are mechanisms that consolidate the remaining balance of your previous home's mortgage into your new home's loan. Even if a debt remains after selling your previous home, relocation is possible, but since the total borrowed amount increases, you need to carefully consider your repayment plan.

Bridge financing is a service that provides temporary funding until the sales proceeds from your previous home are received. Even with a buy-first strategy, you can create a financial plan as if you've already received the funds from your previous home's sale. Since interest rates are higher than standard mortgages, short-term use is expected.

Summary: How to Succeed in Relocating in Sendai

The success of relocation depends on the accuracy of your financial plan. Whether selling first or buying first is more appropriate should be determined by comprehensively considering your available capital, how easily your previous home can be sold, and the timeframe for finding a new home.

By consulting with experts who are familiar with the Sendai real estate market, you can find the relocation plan that best suits your situation. M-Assets offers consultation on both sales and purchases, so please feel free to contact us if you're considering a relocation.