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We are in the market for a new (to us) home. Ideally, we would like to buy the new house, move out of our current one, then sell the current house vacant/staged.
We have a lot of equity in our current home. We have enough cash to make a 20%+ down payment on a new home but not enough to purchase outright. After our current home sells, we'd want to use the proceeds to put us in a position of carrying a single small mortgage. We're open to carrying two mortgages temporarily, but obviously, we want to structure things to be as cost-efficient as possible.
I hope that all makes sense.
Does anyone have any experience with what we're trying to accomplish, and how would you recommend it be done?
Location: Stuck on the East Coast, hoping to head West
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I have a friend who did this. She ended up carrying 2 mortgages for a year. Part of the problem was the house she was selling ended up needing some unexpected repairs. There was water damage that she was not aware of right away because she'd moved out.
I have another friend who bought a new build contingent on selling her current house. The builder accepted this, but I doubt another seller would accept this contingency.
I would not even contemplate this. I would move my stuff into storage and rent a place while I tried to sell the house. Then I'd buy another. Moving twice? Yes. Peace of mind would be worth the aggravation.
It really depends on the market(s) that you're talking about.
What's the average DOM for the market you're moving to?
What's the average DOM in the price point you'll be selling at in your neighborhood? What typically happens in the winter market there?
I'd second the storage facility and a short term rental.
You could use a 'bridge loan' or even a HELOC to get you to the closing table with a higher down-payment and equity position in the new home (and tide you over in the interim). Otherwise, you could be stuck with a higher mortgage payment or a need to re-finance a much reduced mortgage amount. I would certainly explore the best option here with your banker.
Another option might be to put your house on the market with a rent-back agreement, but, that would largely depend on the situation of a buyer.
they will explain to you what today is a "bridge loan". Having the 20% down in cash helps. However, they're going to look at it this way:
*80% total debt (maybe up to 90%) on existing house - if there's room for a HELOC, they'll issue that.
*monthly cost of that debt + monthly cost of new debt - how does that compare to your income?
* after your 20% down, what's your remaining liquid cash reserves?
and, if you already know your Realtor, then have them also go through the DOM exercise noted above.
But before you write any offers, you want to be real certain what your financing plan allows.
You will put your 20% down, and draw down on the HELOC, and then mortgage the rest of house #2 at that closing. When you sell house #1, you pay off the HELOC, and only have the 1 mortgage. If there's some additional chunk of principal, the lender may recast your mortgage (that is, pay down a chunk and recalculate your payment)
We are in the market for a new (to us) home. Ideally, we would like to buy the new house, move out of our current one, then sell the current house vacant/staged.
We have a lot of equity in our current home. We have enough cash to make a 20%+ down payment on a new home but not enough to purchase outright. After our current home sells, we'd want to use the proceeds to put us in a position of carrying a single small mortgage. We're open to carrying two mortgages temporarily, but obviously, we want to structure things to be as cost-efficient as possible.
I hope that all makes sense.
Does anyone have any experience with what we're trying to accomplish, and how would you recommend it be done?
I have done exactly this several times. It's worked out fine every time. The longest I carried two mortgages was about 4 months. The key is to price your former home to sell, and to be brutally honest with yourself about the market where it's selling - and then to just jump in.
Everything sells, remember that. And price overcomes every negative.
We currently just bought a house and moved in, and now our former house is on the market. But we priced it right from the get go and it was under contract two hours after the listing went live. So now we wait for a few more weeks for it all to line out but it's looking fine. Anyway, we actually had paid off that house, so we only have one mortgage but that's one more than we used to have!
When we close on our former house, we have been told by our mortgage company that they have to have six months of payments before they will "recast" the loan with our much bigger down payment (we put about 30 percent down but want to put another 30 percent or so down after we close on the other house). So that will put us at around April before we can recast the loan but we will do so then, which will bring out payments down more. The goal is to pay the house off completely by the time my husband retires in about five years.
I have done exactly this several times. It's worked out fine every time. The longest I carried two mortgages was about 4 months. The key is to price your former home to sell, and to be brutally honest with yourself about the market where it's selling - and then to just jump in.
Everything sells, remember that. And price overcomes every negative.
We currently just bought a house and moved in, and now our former house is on the market. But we priced it right from the get go and it was under contract two hours after the listing went live. So now we wait for a few more weeks for it all to line out but it's looking fine. Anyway, we actually had paid off that house, so we only have one mortgage but that's one more than we used to have!
When we close on our former house, we have been told by our mortgage company that they have to have six months of payments before they will "recast" the loan with our much bigger down payment (we put about 30 percent down but want to put another 30 percent or so down after we close on the other house). So that will put us at around April before we can recast the loan but we will do so then, which will bring out payments down more. The goal is to pay the house off completely by the time my husband retires in about five years.
Anyway, hope that helps.
Oooooh, this does help! Thank you so much for sharing your experiences.
Oooooh, this does help! Thank you so much for sharing your experiences.
You are welcome. If you can afford to do it, and are prepared to be very rational about the whole thing, and can AFFORD to own two houses simultaneously for a bit, there are a lot of pros to this scenario.
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