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Location: Danbury CT covering all of Fairfield County
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House can't even be on the market if you are looking into getting a HELOC. I would recommend talking to a experienced local mortgage broker about financing options.
Last edited by jdhall1; 08-30-2019 at 12:35 PM..
Reason: added more
401k loans are a bad deal unless you can pay them off in short order. If one is laid off, quits or otherwise terminates employement, the loan converts to a distribution if you can’t pay it back in full by the end of October of the year following your separation. A distribution is taxed as income in its entirety and, if under 59.5 years of age, an extra 10% penalty is paid. I read a tax case where a person took a distribution from their 401k (not a loan) to bridge two houses with the intention of putting it back inside of the 60 day (I think 60 anyway) no penalty window. Things didn’t go according to plan and they ended up missing the window to return the distribution by a few days - bam - full income tax on the entire amount distributed plus 10%. That hurt I imagine.
Agreed that a 401(k) loan is not the best way to go. BUT - if the OP has a home that they can sell quickly and has equity in it, this is certainly a viable option. Just throwing it out there as a possibility. I would fully expect the loan to be paid off, immediately, with proceeds from the sale of current property. Additionally, you show an example of a distribution, now - that is certainly _NOT_ what I am advocating to do here.
I much prefer to go the route of having two mortgages simultaneously, but OP might not qualify for that in this scenario. A HELOC is ideal, but it needs to be done 60+ days in advance of putting a purchase on a new house and putting current house on the market.
Owned a home worth about $280K with no mortgage. We wanted to relocate locate and downsize. The place we wanted was $135K and the development was near its end so we had to get in soon. We put a mortgage on the $280K house for $135K. We put the $280K on the market. The new house was a new build so we had to wait 90 days. Paid them as they went. Closed on the new house 90 days later. Split time between both houses (100 miles apart) for a few months. $280K house sold 4 months later (as in 7 months on the market). We paid the mortgage off and walked away with a few bucks.
When we applied for the mortgage the banker (Wells Fargo) asked what we wanted the money for. I said you tell me. He laughed and said I will answer this question. Home improvement and debt payoff (I had no debt). The numbers were so in their favor, they jumped on my business.
if you have a friend that's a good mortgage broker, ask him/her. a banker - ask them. an attorney that handles real estate closings (or escrow officer or whatnot). Or, the Realtor you plan to use, or that you interview for possibly earning your business.
If a Realtor can't get you in front of 2-3 highly capable lenders that will give you details on various scenarios, then that Realtor isn't qualified.
But get started now, so you know exactly what you need, loan-wise.
Then why did you chime in at all on the thread? Someone was here for help and you provided no substance and little to no value. If you're going to make a suggestion it would be decent of you to explain why so the OP can consider your viewpoint. I think I know your answer, but I'm not here to put words in your mouth.
Here is mine. I said HELOC given the choice of that or the bridge loan because then you essentially have the money in hand and it's simpler, cheaper, and less risky than a bridge loan. Arguably, money is cheap right now due to low rates, so depending on the price the OP may be better off just putting down 20% on a conventional loan so they don't have MI and finance the rest w/o taking out any of their current equity.
Or they could pull the equity and keep their cash more liquid for a rainy day.
If you're going to make a suggestion it would be decent of you to explain why ...
If/when the OP asks I'll answer.
As to YOU and what amounts to sniping on responses... Nope I'm not biting on the stinky bait.
With all your experience you really should understand the point well enough.
And if you actually don't... well, how about that.
And if you actually don't... you can (as advised) look up the topic in some of the 1000 other threads and learn.
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