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I'm young and don't understand that much about the depths of mortgages and everything. I'm 22 and have had my own place since May. I put 10% down and have a 30 year fixed loan. I still owe $128,000. I'm not planning on moving for a few years but I keep having a question in the back of my head. What happens when I sell my place and buy another? Do I have to have a whole new down payment for the next property? If I sell the property for more than I owe do I get a check for the difference? When I get a new property does that loan compound with my previous loan?
If you sell your house for more than the balance on your loan, you will get a check for the difference, minus any fees or costs, including the percentage owed to the real estate agent if you use one, that you as the seller are responsible for. Your current loan will be paid off by the proceeds of the sale price. So that loan will be satisfied. If you buy another property, you will need to qualify for a new loan and make a down payment the same way you did the first time. If, as is happening in the current economy, you have no equity in your house because you owe more on the loan than you can sell the house for, you will owe the difference to the mortgage company on your loan. So, obviously, you will want to hold onto the house and pay down the loan so that you are not "upside down" on the loan (owe more than it's worth). In the past, when real estate was appreciating, people would "buy up" by first buying a modest starter home, paying down the loan and having the property appreciate, then use the proceeds from the sale as a down payment to buy a more expensive home.
You typically will have the closing on your place and the closing on your new house the same day. When you sell your house, the the money first goes to paying off your loan, taxes, fees and whatever else. Then you will get a check if there is money left over. Then you would use that check for your new downpayment and closing costs. You will then have a new loan for your new property.
If it does not work out like this and you buy a new house before your old house sells, you will then have 2 mortgages out and this is one way that foreclosures occur, because most people cannot afford 2 mortgages. When you buy a new house, you will probably want a contingency that you have to sell your old house first.
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