If you’re anything like me, when you’re thinking about moving, it’s likely that home shopping comes to your mind way before you think about selling your current home. Why? Because selling is more work, less dreamy, and seems the least fun of the two tasks. There is typically only one little thing standing between you and the perfect new home- your current home. So you want to know how to buy another house while owning a house? There are several options.
Get pre-approved to own both
For most people, it’s not a likely scenario that you want to find yourself in, having two mortgages at once, but it is possible to buy another house while owning the one you have. You’ll need to take a visit to a bank or lending facility, paperwork in hand, and let them decide if you’re able to afford it. After you get official approval from the bank, you’ll want to sit down and make sure you WANT to afford it, even if it means living on peanut butter sandwiches until it sells or leases.
Include a contingency on the offer of your new home
Another option would be to include a contingency for the sale of your existing home on the offer for that perfect new home you found. Basically, the contingency says that if you are unable to sell your home by a certain date, you’re able to back out of buying the new one. You’ve heard it may make your offer less appealing to sellers? Maybe it will, but not having the money to buy it in the first place is pretty unappealing as well. A great real estate agent can advise you on what to expect when using this contingency, based on your market conditions and the particular house you have your eye on.
Research using a Bridge Loan
According to NerdWallet, a bridge loan allows a homeowner to tap into their home equity to pay the down payment on a new home. It comes at a price though. Typically these loans are short-term, no longer than 6 months, and come with a hefty interest rate. Most lenders also require that you have a certain percentage of equity in your current home to take advantage of this option. This loan allows you to buy another house while owning a house, plus you don’t have to worry about the need for immediate cash or including the contingency on your offer.
Use a home equity line of credit
Sometimes you can get creative when coming up with the down payment on another house. This includes using the equity you have built up in your current home in the form of HELOC– home equity line of credit. When you do sell your current home, you can repay the balance of your mortgage as well as the line of credit. But, do your research. Some experts warn against the use of HELOC due to the call provisions (the bank can call for the full amount to be paid) and the high interest rates.
Go for a double closing
If all the stars align, and you have a rock star agent, it’s possible you could buy your new home and sell the old one on the same day, alleviating your anxiety over financials. However, you’ll still need a Plan B. Closings get delayed for a number of reasons, so you still want to make sure you are okayed by the lender to fund a second mortgage, if needed, or Grandma is going to cover your new down payment as a gift if you don’t close your sale on time.
You have options
There are a number of options for how to buy another house while owning a house, and while this list covers the most popular, there are still more. When you’re thinking about purchasing a new home, start the process by seeking out a top real estate agent as well as a loan officer to inquire about which option is best for you. Good luck!