Buy Your New Home Before You Sell Your Old One!
Buy Before You Sell. Too Risky Right? Wrong! Common Home Owner Myth: I can’t buy a “new” house without first selling my “old” one. That is the way it is supposed work…right? You can’t have a new house without getting rid of the “old” one. Not so. Take for example, the story of one of our clients. They had a house (beautiful house, worth about $600,000) and had no intention of leaving. However, one day this house in their neighborhood went on the market. You know the house. It is the one where every time you go by, you wish it was yours. Unfortunately, this house would never be for sale. Out of the blue, the unbelievable happens: the house goes up for sale. Now most would call this a stroke of luck, then it would dawn on them… “We can’t have that house. Obviously, something unforeseen as happened, and they’ll want a quick sale. Waiting for us to sell our house first, won’t be acceptable to them. I guess we are out of luck.” Luckily, this client called us to structure a safe way for him to get his dream home today, buy some time to get his “old” house sold, make both homes affordable during the marketing period, and leave him the exact same long term financing on the “new” home he otherwise would have had. Now that’s a tall order! But we did it. And, so can you! Here are 2 ways to buy a new house without selling your “old” one first. Pull the equity out of your existing house using a Home Equity Line of Credit or a 2nd mortgage. If you could snap your fingers and sell your home, this would be what you’d use to buy the “new” home anyway. So just get it out now. Now, reserve enough of this money to make your “old” house payment for 6-12 months. Your house will take this long to market and with the money set aside you won’t be tempted to take a low-ball offer. Use the remainder as down payment and get your new first mortgage to complete the purchase. When the “old” house sells, both mortgages are liquidated and you are left with one house and one mortgage…the exact same situation you’d have had if you sold your “old” home before you bought the “new” one. But you accomplished it without the wait and the missed opportunity! Another way to achieve the same result minus the “old” house payment reserve is to use an 80% first mortgage and a 20% 2nd mortgage also called 100% financing, to buy the new house. You won’t have to put any money down and when your “old” house sells, you use the proceeds to pay off the 2nd. The only difference is you don’t get any “extra” money to use to offset two house payments during the marketing period. Many of you, have existing lines of credit or other sources, so this may not be necessary.
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