fbpx
Buy Before You Sell Options
The decision to buy first or sell first, has always been a little of the “Which came first: the chicken or the egg?” type of question. Is it better to buy another home before you sell your current one or sell the current one before you buy the replacement? Some buyers don’t have a choice […]
Buy Before You Sell Options
The decision to buy first or sell first, has always been a little of the “Which came first: the chicken or the egg?” type of question. Is it better to buy another home before you sell your current one or sell the current one before you buy the replacement? Some buyers don’t have a choice […]

mh8ihsiDbU2xzv3gm0xH7g.jpg

The decision to buy first or sell first, has always been a little of the “Which came first: the chicken or the egg?” type of question. Is it better to buy another home before you sell your current one or sell the current one before you buy the replacement?

Some buyers don’t have a choice because they need the equity out of the current home to purchase the new one and possibly, their income limits their ability to qualify for having both mortgages at the same time. However, some buyers, with sufficient financial resources, may have other options available to facilitate the move.

A home equity line of credit, HELOC, is a type of loan that a traditional lender like a bank will loan up to the difference in what is currently owed on the home and 75-80% of the value. A borrower is approved for the line of credit and then, can borrow against it as needed.

A homeowner with sufficient equity, would want to secure a HELOC prior to contacting for the new home. Typically, the interest will be due monthly. When they sell the home, the loan would be paid off along with any other liens on the property like the first mortgage.

A bridge loan is different in that it is usually a specific amount of money for a short term used to “bridge” the time frame necessary to acquire the replacement property and sell the existing home. The amount available is like the HELOC, usually, up to 80% of the home’s value less the existing mortgage.

Some lenders may require being in the first position which may require retiring the existing first from the proceeds from the bridge lender.

Hard money lenders are a little more flexible in some of their requirements compared to typical lenders, but it comes at a cost. They could charge two to three percent, called points, of the money borrowed paid up-front and the interest rate will be higher than long-term mortgage money.

Another alternative is to find a conventional lender who has a program that allows you to recast the loan in a specified period. The borrower would get a low-down payment mortgage on the replacement home and after the original home is sold and funded, the lender will apply the lump sum toward the principal amount owed and recalculate the payments and amortization schedule.

By recasting the loan, the borrower does not go through the process of getting a new mortgage by refinancing and saves the costs involved. Most conventional loans and conforming Fannie Mae and Freddie Mac loans allow it after 90-days. FHA, VA, GNMA loans do not allow recasting.

Borrowers with 401(k) retirement accounts may consider borrowing against that asset which could be a lower interest rate than other temporary options. Depending on the size of the 401(k), the amount available to borrow could be up to half the balance or $50,000 whichever is less. If the loan isn’t repaid in a timely fashion, there can be taxes and penalties.

In each of these options, the seller is involved in borrowing money to accommodate a purchase and sale of a home. There will be expenses involved but the advantage is that they have a better chance of realizing most of their equity while facilitating a purchase before they sell their home. This is particularly helpful in markets that are low in inventory.

One last options is to consider selling your existing home to an iBuyer or private investor. The attraction to this alternative is that they will make you an instant offer, buy your home and you’ll have cash to use to purchase your new home. These companies or investors, intend to resell the property, so they must discount the price they pay for your property taking into mind they will be responsible for repairs, maintenance, selling fees and other expenses.

While it may sound appealing, you may discover that the amount you will realize will be less than if you sell your home in a conventional manner.

Your real estate professional will be able to do a comprehensive market analysis to indicate market value and the net proceeds you can expect to have. This will assist you in determining which option makes sense for you at this time. They can also recommend lenders and approximate timelines for each alternative.

LIST OF BLOGS

Understanding Credit Life Insurance for Home Buyers

Credit life insurance is a specialized type of insurance designed to provide financial protection for borrowers and their families in the event of the borrower's untimely death. This insurance is often associated with loans, including mortgages, and is specifically...

Discover how to make a difference in your neighborhood

Whether you're a seasoned homeowner or just starting this thrilling chapter, every time you turn your key, you're not just entering a house but also embedding yourself in a neighborhood. The heartbeat of a vibrant community doesn't solely rest upon pristine lawns or...

How Home Value Growth Beats Renting

Over the last 60 years, the average sales price of homes has appreciated at a rate of 5.56% annually, according to the Federal Reserve Economic Data. During the same period, rent has increased at a rate of 3.88% annually which presents a compelling argument in favor...

Access “Trapped Equity” without Refinancing

American homeowners have a record amount of equity in their home. Many of these homeowners would like to cash out part of that equity but don't want to trade an historically low interest rate for one that is as high as it's been in 20 years. Instead of refinancing...

Navigating Closing Costs During Your Home Sale

Buying or selling a house is an exciting and sometimes confusing experience that includes expenses called "closing costs" that can often catch us by surprise. Closing costs are simply the fees and expenses incurred by buyers and sellers during a real estate...

Tap into your home equity five ways

Your home is not just a place to live; it's a valuable asset that can serve as a financial resource when you need it most. One of the significant advantages of homeownership is the opportunity to build equity over time, which can be accessed in various ways to fund...

New Construction Homes with Your Own Agent

Homebuyers in the market who are frustrated by the low inventory are finding what they want in new construction. Among the obvious advantages are that it is fresh and new, has never been lived in, and can be personalized to an individual's taste and needs. New...

How Rapid Rescoring Can Make a Difference

Imagine you're on the verge of securing a mortgage, and a slightly higher credit score could mean a lower interest rate. The good news? There's a quicker way to make that possibility a reality. Mortgage loans are often more time-sensitive than other loans. If you find...

Why It’s a Smart Move to Buy a Home in the Current Market

If you're in a financially stable position, now might be the perfect time to embark on your homeownership journey. Buying a home today offers several advantages, including the opportunity to build equity and stabilize your housing costs in the face of rising expenses....

RECENT POSTS

ABOUT  TWENTY
THREE HOMES

The Twenty Three Homes are one of the premiere real estate groups locally, nationally and internationally, specifically dealing with high-end properties and exclusive clientele. Partner with Keller Williams Twenty Three Homes are full service real estate experts whose clients benefit from the custom tailored, hands on service while receiving all the exclusive amenities and resources of one of the most established and respected firms in the business.

GET IN TOUCH