Buying Your New Home Before Selling Your Current House
Typically, when you’re building a new home, you make the down payment and take out at least a partial mortgage while the home is being built. If you own your current home, this means carrying two mortgages – could be for up to a year.
Many families wonder how they’ll be able to balance this.
If you sell your current home right away, where will you live? If you wait to sell your home until later, what if you can’t find a buyer quickly?
Sometimes, it can feel like that old house is holding you back. And while there are good ideas for buying and selling a house at the same time, you want it to be as easy as possible for you.
Fortunately, the options below work nicely for those who currently have a home but want to get into something newer.
Rent Until You’re Ready
One option is to go ahead and put your current house on the market right away. This can alleviate any fears you might have about making sure it sells.
When it does sell, move into an affordable rental unit while you wait for your new home to be finished. It frees up the equity in your home for you to use as a down payment or mortgage payments, and it could even reduce your monthly payments.
It also keeps you in your desired area and takes the pressure off making a quick sale of your old home.
On top of that, you can take your time making decisions with the details of your new home. You won’t feel rushed or pressured.
Rent to Someone Else
On the other hand, you can opt to keep your old house and make some added cash with it. Consider renting it out for some profit. This way, you can move into your new home right away while having someone else pay your old mortgage for you!
It’s a great solution for those whose homes aren’t selling as quickly as they’d hoped. You may even find that you like being a landlord.
Porting Your Mortgage
Worried about facing penalties from paying off your current mortgage too early? Porting your mortgage – transferring your existing mortgage to your new home – may be the solution you’re looking for.
This option varies from lender to lender, but it is one of the most effective things you can do if you’re looking to buy and sell at the same time.
Not only will porting lock in your old interest rate but generally there are also little to no charges if you’re downsizing to a smaller home. Buying a larger home may come with a few additional costs. Be sure to speak to your lender to see if porting is the right option for you.
Home Equity Lines of Credit
A Home Equity Line of Credit, or HELOC, is a loan that’s influenced by the amount you have leftover on your mortgage on your current home.
This type of loan is somewhat comparable to a credit card, as it’s typically set up with an account that includes annual maintenance fees.
What sets a HELOC apart is you can receive a loan based on and up to 65% of your home’s existing equity. This means you can put it towards a down payment on your new home while you’re waiting to sell your old one. Generally, you’ll have 20 years to pay off the loan, which is more than a reasonable amount of time to pay back your down payment.
Purchasing Quick Possession Homes
Picking out all of the details in a new home can be fun, but if that’s not something that’s important to you, consider looking into a quick possession home.
We always have a selection of move-in ready homes for people who don’t want to deal with the wait – or the hassle of figuring out how to balance multiple mortgage payments.
When you buy a quick possession home, it works in a similar way to buying a resale home. It takes several weeks to get the mortgage paperwork done, and you sell your home during that time. If you can’t sell the home right away, you can rent it out.
This is a great solution for those who are a little nervous about how they’ll manage their finances during the time it takes to build a new home.
There are many ways to purchase a new home before you sell your old one, so don’t be afraid to weigh your options. Speak to your builder’s preferred lender about what choices are available to you and start looking forward to your new home!
Our knowledgeable Area Managers can help you answer questions about finances and more. Get in touch now and see how we can help you!
Originally published Sept 5, 2017, updated April 7, 2020.