Buying a new home before selling your current home certainly makes it easier to move as you wouldn’t have to worry about where to keep your stuff or stay. However, it carries the risk and potential complications of having dual mortgages. While paying for two mortgages for a few months is attainable, there’s no guarantee your home will sell that quickly, and that could force you to be in a sticky situation that tangles you up in a financial mess. You want to avoid this by all means. Here are some ways on how to avoid two mortgages after buying a new home.
Proper planning and working with a knowledgeable real estate agent can help you navigate through it all more smoothly. Here are some strategies to help you manage the process and keep your sanity intact.
Selling Through an iBuyer
You can make the selling and buying dates coordinate a little better by selling your home through an iBuyer. It’s more convenient, less stressful, and happens with fewer contingencies. With the iBuyer model, you can get a competitive offer for your home within days, giving you quick cash for your current home so you can afford to close the deal on a new property. You avoid the stress of falling into a dual-mortgage trap or constantly worrying about timing everything just right.
Simply answer a few questions about your home, and if your home qualifies, you’ll receive a no-obligation offe. Then, if accepted, you can go to closing right away without ever having to list your home on the market.
Get a Contingency Contract
You can make the purchase contingent on the sale of your current home. Just make sure you give the seller plausible reasons why your home will sell quickly. The only downside here is that contingent offers aren’t as attractive as traditional, non-contingent offers. Even when a seller accepts a contingency offer, they can still opt to consider other offers forcing you to drop your contingency.
Renting Out Your Home
You can also consider renting out your current home or consider using it as an Airbnb to cover your mortgage payments. Even if the rental income isn’t enough to cover your full mortgage payment, lowering that monthly payment is still beneficial. Just make sure there are no rules associated with your home insurance policy or current mortgage loan that prohibit you from renting out the property.
Factor in the Market
Ensure you have a solid understanding of the housing market in your local area. Timing is crucial in the buying and selling of a home, and it really does depend on the local housing market. If in a seller’s market, you may realize that you can get your home sold quickly.
Another tip is to cover the costs of your next home with savings, loans from family or friends, a bridge loan over the short term, or a home equity line of credit. With a bridge loan, you’ll get a short-term loan to cover the old mortgage, the down payment and closing costs of your new home. The loan is then repaid when your old place sells. Since the loan carries very high-interest rates, you’ll need to be prepared to repay it fairly quickly.
As an alternative to bridge loans, home equity lines of credit (HELOCs) can give access to money for a down payment, assuming you have significant equity. Many lenders frown on this if you’ve already put your present home on the market, so arrange for your HELOC before the sales activity. Shared equity agreements are also an option for many homeowners to get cash in exchange for giving up a part of the profits in the future when they sell the home.
Always discuss your options with your realtor to decrease your financial burden and risk.
Finding Help with Moving Professionals
We hope you found this blog on How to Avoid Two Mortgages After Buying a New Home useful. For more tips, check out this one blog of The Real Estate Home Buying Process.
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