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Here's the situation. We're in Lafayette IN, we own a home which we owe about $40000 on (3bd, 2 bath ranch in subdivision built in 2001). We have around 55000 in the bank. We are looking at moving up to a home around $240000 (specifically have my eye on a West Lafayette property with a bigger lot, walk out basement, more room). What would you do?
Does it make sense to pay off our loan on our existing home--and then purchase the new home for $240000 with a small downpayment and then pay the large downpayment when ours sells (meaning move out of our existing home to the new one and then put ours on the market)--or???
I figure we can afford the mortgage payment of $1300 or so until ours sells (thus making the payment more like $800)--
Perhaps we would just move most everything out of our existing house to the new one and then still have it 'staged' looking until it sells with most furniture still there?
Do NOT pay off a loan on house you are selling. That will be a waste of time and money.
If you have $55K in the bank and want to buy a home worth $240K you have CASH for a huge downpayment of almost 23%. THAT is what you want!
If your current home is listed for sale you may want to wait until you have an offer before your make an offer on your new house, so that you do not have to make a contingent offer. That way you minimize any risk of having to make two payments.
No reason to buy first under these market conditions and no reason to take money out of the bank and make it illiquid. That would expose you to TREMENDOUS downside potential!
Once your first home sells any equity that you have from the closing is yours to either increase your downpayment or ANYTHING else you want to do -- much more flexibility!
I worry though about the new house selling quickly as I think it is a good deal compared to everything we have looked at-also I have a feeling it will take a long time for our house to sell as there are tons on the market just like it-if they will not accept a contingency offer (contingent on the sale of our home)--would it be ludicrous to go ahead with the purchase and just keep our on the market making minimum payments? (thus using the $55000 for a downpayment on the new)--?
I worry though about the new house selling quickly as I think it is a good deal compared to everything we have looked at-also I have a feeling it will take a long time for our house to sell as there are tons on the market just like it-if they will not accept a contingency offer (contingent on the sale of our home)--would it be ludicrous to go ahead with the purchase and just keep our on the market making minimum payments? (thus using the $55000 for a downpayment on the new)--?
A home sale contingency imposes incremental risk on the seller. You lose potential negoitating power because there is no certainty of closing. Is there any reason why you cannot wait till your current home sells before pulling the trigger on the buy side?
I would like to wait till ours would sell but I am worried about this one getting snatched up as it is VERY competitively priced for all it offers. I don't want to wait and then lose our 'dream' house.
In this market the ONLY WAY that I would recommend anyone "buying a new home before their old sells" if quite literally if the new home was SO CHEAP or they had SO MUCH ACTUAL cash that they could own the 'new' house FREE & CLEAR.
There is just too much risk of the old house declining in value / spending a VERY long time on the market. It is very tough to make utility, insurance, and payments on two houses, to say nothing of the disruption of having two houses to MAINTAIN.
Believe me, no matter how nice the new house seems it would be a NIGHTMARE to be stuck with two house payment for an extended period of time! That pile of cash that right now you can earmark for a big downpayment would quickly be whittled away / trapped in lost equity.
Do everything you can to make your current house as desirable / attractive / appealing / sellable as possible BEFORE you list it and you may be pleasantly surprised how QUICKLY it sells if it is priced right!
Once your existing home is sold it is SO MUCH EASIER to then make a solid offer on the new home. If some one else 'beats you to it" this is always the possibility that SOMETHING BETTER will come on the market!
In 'hot' / rising market my advice MIGHT be different, but there is TOO MUCH uncertainty in the current real estate market. For evidence of this you can look at "bridge loans" which are what people were doing when they needed to borrow to buy a new home before their old home sold. At the floor or bridge loan pricing rates were UNDER 5% a year -- now they are often OVER 4x IF YOU CAN EVEN FIND A LENDER AT ALL. Totally different levels of risk!
Keep your CASH SAFE, like gun powder before you go out hunting, that will give you a huge amount of bargaining power down the road!
I would like to wait till ours would sell but I am worried about this one getting snatched up as it isVERY competitively priced for all it offers. I don't want to wait and then lose our 'dream' house.
I think you got excellent advise above.
If the new is so competetive priced, why not price your old house competitively and move it fast?
Well we do plan on pricing ours competitively but my husband refuses to sell at a price which is less than what he paid for it when he built it 8 years ago and then added and made improvements.
So how likely is someone to take an offer with a contingency to sell our home? How long do these usually run 2-3 months more?
I worry though about the new house selling quickly as I think it is a good deal compared to everything we have looked at-also I have a feeling it will take a long time for our house to sell as there are tons on the market just like it-if they will not accept a contingency offer (contingent on the sale of our home)--would it be ludicrous to go ahead with the purchase and just keep our on the market making minimum payments? (thus using the $55000 for a downpayment on the new)--?
You answered your own question. If you are all ready worried, there is NO WAY you should buy non-contingent.
In this market I tell people they should be pre-pared to be paying 2 mortgages for 2 years.
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i worry
