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Buying new house before selling current one
Posted on 5/27/20 at 12:03 am
Posted on 5/27/20 at 12:03 am
So mostly assumed most everyone needed to sell current house before buying a new one but have been hearing more about people buying new house with only 5% down and then later when old house sells they pay down and do a one time adjustment to the amortization.
There are certainly some risks in this.
Thoughts?
There are certainly some risks in this.
Thoughts?
6
Posted on 5/27/20 at 12:18 am to GeismarGeauxer
(no message)
This post was edited on 10/18/21 at 4:39 pm
Posted on 5/27/20 at 12:21 am to GeismarGeauxer
There's a lot of options.
You can HELOC (if you can get one now) your house now and use that money for the down payment on new house. Sell current house which pays off mortgage and HELOC. Can't take a HELOC on a house listed for sale as I understand it so you'd want to do that now. There's also bridge loans but I didn't research that much.
You can take money from a retirement account like a ROTH for the down payment and replace the money within 60 days. The replacement money could be the proceeds of the house you sell but if you don't sell fast enough, you could use some other avenue to replace the money, like a personal line of credit. Again, you'd want that all set up before you start the ROTH clock. Of course, pay the PLOC off once house sells.
If you have some time before all this happens and you aren't needing a ton of cash, another avenue is a 0% credit card to put all expenses on to free up cash flow. Then once all transactions take place pay it off and reset. I did this once on our second house to free up about 10/15k to get through closing and paid it off shortly after.
I'm probably missing some other options. I tried to think of creative ways as I imagine if you had a simpler method you wouldn't be here. Sometimes the house you want and can afford shows up a month or two before you're ready, but obviously don't stupidly leverage yourself. Some folks with more real estate investing experience may have other ideas that are better.
You can HELOC (if you can get one now) your house now and use that money for the down payment on new house. Sell current house which pays off mortgage and HELOC. Can't take a HELOC on a house listed for sale as I understand it so you'd want to do that now. There's also bridge loans but I didn't research that much.
You can take money from a retirement account like a ROTH for the down payment and replace the money within 60 days. The replacement money could be the proceeds of the house you sell but if you don't sell fast enough, you could use some other avenue to replace the money, like a personal line of credit. Again, you'd want that all set up before you start the ROTH clock. Of course, pay the PLOC off once house sells.
If you have some time before all this happens and you aren't needing a ton of cash, another avenue is a 0% credit card to put all expenses on to free up cash flow. Then once all transactions take place pay it off and reset. I did this once on our second house to free up about 10/15k to get through closing and paid it off shortly after.
I'm probably missing some other options. I tried to think of creative ways as I imagine if you had a simpler method you wouldn't be here. Sometimes the house you want and can afford shows up a month or two before you're ready, but obviously don't stupidly leverage yourself. Some folks with more real estate investing experience may have other ideas that are better.
This post was edited on 5/27/20 at 12:27 am
Posted on 5/27/20 at 6:27 am to Teddy Ruxpin
quote:
You can HELOC (if you can get one now) your house now and use that money for the down payment on new house. Sell current house which pays off mortgage and HELOC. Can't take a HELOC on a house listed for sale as I understand it so you'd want to do that now. There's also bridge loans but I didn't research that much.
I've done this before, the HELOC was pretty good terms, I think 0.5% for 6 months. The house I was selling was paid for so it was manageable. You are correct, the bank won't do a HELOC if you are selling the home (or at least that was the case a few years ago). I did the HELOC then the mortgage, using the same bank.
It worked out for us then but not sure I'd do it again. You can get stuck if you have trouble selling your house.
Posted on 5/27/20 at 7:48 am to CajunTiger92
Ya, I'm not advocating anything but he wouldn't be asking if he had the money free and clear from selling the current house. All of those scenarios can be stressful. Good news is I hope he can't make a contingent offer because he's in a hot market, in which case selling his current house has some lower risk as long as it's priced well.
This post was edited on 5/27/20 at 7:52 am
Posted on 5/27/20 at 7:52 am to GeismarGeauxer
works fine if you are smart about it. Make sure you can carry both mortgages indefinitely. Make sure the new house loan has a re-amortization (recast) option or you'll be stuck refinancing when the old house sells if you want to lower the new mortgage payment.
Posted on 5/27/20 at 7:58 am to GeismarGeauxer
Just to add to this a mortgage broker told me recently in some cases you can go as low as 3% down.
Posted on 5/27/20 at 9:32 am to jmtigers
We did this last year and ended up just keeping our other house and renting it out.
Only needed 5% down for the new house. If you go this route you'll have to pay PMI until you reach 80% loan to value.
Only needed 5% down for the new house. If you go this route you'll have to pay PMI until you reach 80% loan to value.
Posted on 5/27/20 at 9:53 am to GeismarGeauxer
I did this two years ago. This was so that we could move out/move in on our schedule.
You just have to be able to afford/qualify for two mortgages. Though I put down 20% on the new house to avoid PMI.
While I didn't need to, I took a loan from my 401k just in case. I've heard/seen enough things to want an additional cushion if something went wrong. Once the old house sold, I paid off the 401k loan. I'd only do this if your 401k doesn't force you to pay it back if you get laid off, leave the company etc.
You just have to be able to afford/qualify for two mortgages. Though I put down 20% on the new house to avoid PMI.
While I didn't need to, I took a loan from my 401k just in case. I've heard/seen enough things to want an additional cushion if something went wrong. Once the old house sold, I paid off the 401k loan. I'd only do this if your 401k doesn't force you to pay it back if you get laid off, leave the company etc.
Posted on 5/27/20 at 12:32 pm to Teddy Ruxpin
quote:
You can HELOC (if you can get one now) your house now and use that money for the down payment on new house. Sell current house which pays off mortgage and HELOC.
I have also done this. Compare interest on HELOC versus PMI to decide if you want to use the HELOC to fund 20% down.
Posted on 5/27/20 at 12:45 pm to GeismarGeauxer
I made 2 house payments from December 2018 to December 2019. Plus a home equity loan for renovations on new house. Actually it wasn't too bad because I guess I live well below my means. All 3 payments might have been $2,200/mo.
The loan process was kind of a pain because most lenders are lazy and don't really want to work very hard. Part of the problem was that I was pushing to get a secondary market loan on house 2 with the same lender I had a secondary market loan on house 1 and they gave me grief saying they couldn't have multiple primary residence loans to the same customer.
The loan process was kind of a pain because most lenders are lazy and don't really want to work very hard. Part of the problem was that I was pushing to get a secondary market loan on house 2 with the same lender I had a secondary market loan on house 1 and they gave me grief saying they couldn't have multiple primary residence loans to the same customer.
This post was edited on 5/29/20 at 12:22 pm
Posted on 5/27/20 at 1:01 pm to Teddy Ruxpin
quote:
You can HELOC (if you can get one now) your house now and use that money for the down payment on new house. Sell current house which pays off mortgage and HELOC. Can't take a HELOC on a house listed for sale as I understand it so you'd want to do that now. There's also bridge loans but I didn't research that much.
HELOC
So tried current mortgage company and they don’t them in LA. And tried current bank and they don’t do them anymore. Any other ideas?
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