Selling Your House While Buying Another: How To Avoid Paying Two Mortgages
If everything goes according to plan, you will sell your old home first and buy a new one on the same day.
But since everything rarely turns out according to plan, there are a few things you need to take into account. You need to realize that there is a huge chance that you might buy a new house before you can sell your old one, and this means you will be paying two mortgages.
Shouldering two mortgages is harder with the current state of the economy. Aside from the fact that it will be harder to get a second mortgage approved, but it may also take another six months before you can sell your old house.
To help you avoid paying two mortgages, here are a few tips to ease the transition.
Selling Your Home First
One of the main advantages of selling your home before buying a new property is that it minimizes the financial strain. Even if you have to look for temporary lodging, it is still cheaper than paying for two mortgages. If an offer is given for your old house but you haven’t found the right house yet, try to negotiate with the buyer. Here are a few options:
Rent Your House
This means that you can negotiate with the buyer to allow you to rent back your old home until you find the right house. All you need to do is draw up a contract which includes the terms allowing you to stay for a period of time. In exchange, you must agree to pay the price of the new mortgage, utilities, homeowners insurance, and property taxes. Remember though that this option may be a lot more expensive, especially if your house has appreciated over the years.
Move In to Another Place
You can consider moving in with a relative or a friend. This option entails moving out of your house, which means that you also need to get your valuables and possessions out of the house as well.
What should you do with your stuff?
You can move in with your relatives or parents but you cannot possibly bring your furniture pieces and other belongings into their property. The best option is to rent a storage unit where you can keep your things while you are in search of a new house. You will also need to pay the movers twice and pay for the storage unit where you can securely keep your stuff. It may cost a few hundred bucks, but it is a much cheaper alternative than paying two mortgages.
How To Own Two Houses For A Short Time
What if you are unable to perfect the timing between the sale of your current house and the purchase of a new one? One scenario would be to have money in the bank but you will need a temporary place to stay. Another scenario is to own two houses briefly.
No one wants to own two residences since it will double their mortgage. Even mortgage companies are uneasy about approving loan applications of clients; thus, to make this work, you will need to qualify for both loans. If you can’t qualify, you have no choice but to sell your current house first. Here are a few suggestions to help you deal with such situation.
Borrow money from family or friends for the down payment:
You can ask your relatives or friends for help, but you need to assure them that you will only need help for a short time. It is also advisable to offer a competitive interest rate. Arrange the agreement so that you won’t have to pay monthly until you sell your old house. Remember though that some financial institutions will still reject your loan application if your down payment didn’t come from your own resources. Read: Trauma Insurance And TPD – Understanding Their Relevance
Get A Bridge Loan From Banks
If you cannot borrow money from relatives or friends, it is possible to lend money from financial institutions to bridge the time between closing the deal for the new property and selling your old house. This process entails taking out a short-term loan on your old house, using it to pay for the down payment on your new property, and paying off the loan when your old house sells.
Keep in mind that bridge loans can be quite expensive and it is not very easy to quality for it. You will need to have plenty of equity in your current residence and enough income to pay the mortgage payments for an indefinite period.