Strategies for making the move to your next home
The simplest way is to find a house you like, and make an offer on it contingent on selling your house first. In an ideal world, the seller accepts your offer, no problem. However, in the real world, the seller may have had a bad experience with contingent offers in the past, and will not accept your offer. Or the property may be in great demand so you have other people making offers on the same property, and you will not win the bidding war with a contingent offer.
So sometimes you just have to make a non-contingent offer. That means you have to buy your next house without selling your present one first. How can you do that?
Before I explain some strategies, let me first say that the ideal strategy is still selling your place first, even with a non-contingent offer. To do that, you buy the new house with a longer escrow, say 60 days. That gives you 30 days to find a buyer for your current house, 30 days to close escrow on it, and you bring a cashier’s check to the escrow on your new place. Mission accomplished.
But the offer you made on the new place was not contingent on selling your house, so what if it doesn’t sell, or your sale falls through? Since your purchase is not contingent on your sale, you still have to proceed with it. So we need a “Plan B”. Now keep in mind that as far as you are concerned, “Plan A” is to sell your place first, and “Plan B” is only to use the alternate financing if “Plan A” doesn’t work out. But we will write a non-contingent offer that shows you will be purchasing the new home using the financing. If you don’t use the financing at the last minute and bring in cash instead, no one is going to complain.
So that’s the big picture. Now let’s get into some specifics. You need to decide if the end result is to own the new place free and clear, or be left with a mortgage on it.
End Result – Free and Clear
Strategy 1. Buy the new house using a big home equity line as the purchase money. You can get equity lines up to $500,000 these days and the fees are very low. When your current house sells, you pay it off. Easy and simple.
Strategy 2. You get an equity line on your current residence before putting it on the market. This means you can just write a check to purchase the new place. Very sweet.
Strategy 3. On homes over $500,000 you may need to do strategy 1 and 2 together to make up the money. Then both equity lines go away when you sell you current home.
It helps to think ahead on this and set up the equity line on your current home now, before you need it. If you find a new place you can’t live without, and then do Strategy 1, you will have to wait 30 or 45 days to get the equity line, and then put your house on the market. This increases the time you will be paying interest, but it still can be done.
End Result – Have A Loan On The New House
Strategy 1. Buy the new house using a big home equity line as the purchase money. You can get equity lines up to $500,000 these days and the fees are very low. When your current house sells, you pay off part of it, and are left with a mortgage balance that you can pay interest only, or fully amortized. Easy and simple.
Strategy 2. You get an equity line on your current residence before putting it on the market and use that as the down payment on the new place. Then you just get a regular mortgage on the new house.
Strategy 3. Get a first and a second trust deed on the new house. The first is for the mortgage amount you want to have when all is said and done. The second is a “swing loan”, and you pay it when your current house sells. This keeps your loan fees to a minimum, and you have a lower interest rate on the first than if you did a “swing loan” for the entire amount.
So that gives you some ideas. The bottom line is that where there’s a will, there’s a way. If you really want to make this move, than we can probably figure out a way to make it happen, even if you don’t sell your house first.
If you have any questions about this, feel free to contact me and I’ll be happy to discuss some options with you. Remember I’m here to make your move an easy one!