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cibula11 02-26-2012 03:40 PM

Buying and Selling ??
 
Let's say we have $100,000 left to pay on our current home mortgage. If we sell for $150,00, where does that money go?

My wife and I are looking to buy a new home for our growing family. We have some specific wants /needs so I don't think that selling our current home first is a great option.

If we bought a new home and put down cash for a down payment, what happens to all the money we would make by selling our first home? In other words, we would carry two mortgages for a short time. Can that be put into the principal of the new mortgage even though we've already bought the second house?

creeper 02-26-2012 04:05 PM

I'm going to assume the 15,000 is a typo and you mean 150,000.
You can try to arrange the closing of both homes as close to each other as possible, so you are not carrying two at once. In Canada, if you have reached your closing date on a second property and your current home has a firm offer on it but not due to close for some months the Lender may provide you with " bridge financing" to decrease your burden.

As far as paying down the principal when the 50k becomes avaliable that is a question you will have to ask your Lender. I personally have a clause in my mort. contract that allows me to double up monthly payments, or indeed put down a chunk if I ever was so fortunate to have it.

I best not comment further because the terms I speak of are Canadian and may not be applicable where you are. Make an appointment with your mortgage specialist and get a commitment so you know exactly where you stand.

cibula11 02-26-2012 04:25 PM

Thanks. And yes, I meant sell for 150, not 15. I know that when you sell, typically, you can put down what you made on your sale towards your new mortgage. In my case, I would be carrying two mortgages and then only have the money once the first home sells. I know it wouldn't go into my actual mortgage at the time of purchase, but I was hoping I'd be able to use it to pay down the principal.

dougp23 02-26-2012 04:52 PM

You will have to carry two mortgages. You should talk to a banker and make sure you are financially acceptable to the bank to carry two mortgages. Once you sell house number one, the money is yours to do as you want, including pitting it towards the mortgage on house number 2.

Bridge loans are available in some states in the US. Interest rate is higher than traditional mortgage usually.

cibula11 02-26-2012 04:58 PM

Quote:

Originally Posted by dougp23 (Post 864078)
You will have to carry two mortgages. You should talk to a banker and make sure you are financially acceptable to the bank to carry two mortgages. Once you sell house number one, the money is yours to do as you want, including pitting it towards the mortgage on house number 2.

Bridge loans are available in some states in the US. Interest rate is higher than traditional mortgage usually.

Thanks. And yes, we will need to contact the loan officer we've used to help us know what we can are approved for if we need to carry two.

Daniel Holzman 02-26-2012 05:12 PM

Typically if you sell a house for $150K and owe $100K on the mortgage, then at closing time the remaining principal of the mortgage is paid off, and your mortgage is extinguished. Whatever money is left, after fees, attorney costs, real estate broker costs etc., is yours to put down as a down payment on the next house, although the timing can be awkward, as previously discussed.

jbfan 02-26-2012 06:07 PM

I strongly advise not trying to carry two mortgages at the same time.
Don't forget Mr. Murphy, who has a way of showing up when least expected.

I can look around any hood and see people trying to do this and failing.

dougp23 02-26-2012 06:09 PM

I don't know your financial status, but here's what a friend did with one of his purchases:

The new house was a foreclosure, so low priced.
Took out a homeowner's loan on his current house and added funds he had from savings and mutual funds. In effect, paying cash for home number two.
Closes on house two, now puts house one up for sale. When it sold, paid off the home equity.

Again, it can work (carrying two mortgages). I wouldn't want to carry two homes for too long... Two sets of property taxes, two insurances, two sets of utilities, etc.

cibula11 02-27-2012 07:06 AM

No doubt carrying two mortgages isn't the greatest option, but we've been told our home won't take too long to sell. Even if it takes a month or two after closing on the other house, I figure we can make it work. Again, not ideal, but worth making sure you get the house you want in the end.

creeper 02-27-2012 07:26 AM

Its always better to have a clean an offer as possible, but there is nothing wrong with asking for the offer to be conditional upon the sale of the buyers property. Of course if there are multiple bids on the property you seek it may not be prudent to include such a clause. Otherwise it may work in your favor

creeper 02-27-2012 07:31 AM

Quote:

Originally Posted by cibula11 (Post 864591)
No doubt carrying two mortgages isn't the greatest option, but we've been told our home won't take too long to sell. .

I have seen people really get stuck because of an over zealous Realtor. I have seen that very statement backfire many times.

DO NOT get yourself into that postion unless you can absolutely manage to carry two mort's

CoconutPete 02-27-2012 08:38 AM

Quote:

Originally Posted by cibula11 (Post 864591)
No doubt carrying two mortgages isn't the greatest option, but we've been told our home won't take too long to sell.

I went to an open house with my sister in law last weekend because she's considering buying. The house had been empty for a year because the sellers realtor told them the same thing.....:whistling2:

dougp23 02-27-2012 09:19 AM

Quote:

Originally Posted by CoconutPete (Post 864643)
I went to an open house with my sister in law last weekend because she's considering buying. The house had been empty for a year because the sellers realtor told them the same thing.....:whistling2:

It just really goes without saying (but I will say it anyway) that your Realtor is there to protect you, BUT....what matters most is their commission. And to the OP: you are confident you can quickly sell your existing home. REALLY? Have you done any research to see what similar houses are selling for and how long it takes to sell them? At a bare minimum, plan that it might take 12-18 months to sell your home. Can you carry two mortgages that long without going belly up?

Again, what you are proposing is do-able, but be real real careful. I would try and make the purchase of the new home conditional on the sale of the existing home, but if you can't, then you can't.

creeper 02-27-2012 09:31 AM

Quote:

Originally Posted by dougp23 (Post 864664)
It just really goes without saying (but I will say it anyway) that your Realtor is there to protect you, BUT....what matters most is their commission. And to the OP: you are confident you can quickly sell your existing home. REALLY? Have you done any research to see what similar houses are selling for and how long it takes to sell them? At a bare minimum, plan that it might take 12-18 months to sell your home. Can you carry two mortgages that long without going belly up?

Again, what you are proposing is do-able, but be real real careful. I would try and make the purchase of the new home conditional on the sale of the existing home, but if you can't, then you can't.

Easy there Doug> Not all of us Realtors have that mentality. Of course I'm not in it on a volunteer basis, but I'm not about to give advice that could be the demise of a family either.
My job is to present the facts of the situation. Pros and cons. Offer my opinion yes, but I always make sure my clients are aware of the "what ifs"

Certainly I have offered an opinion on how long it will take to sell a home, but never, not once, have I advised a client to go firm on a property, without having a firm offer on the current home.

I need to sleep at night

dougp23 02-27-2012 01:30 PM

sorry about that creeper! You are correct, there are many excellent realtors (the one I used to do what the OP is proposing here is a good example).
Just for the OP: YOU will be most impacted by whatever happens. Get as much info as you can from your realtor (comparable sales, time to sell, mortgage rates, property taxes, etc etc). And then do a lot of homework yourself.

Good luck!


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