Trying to understand if I’m putting myself in a bad position. We are planning to buy a house, move, then fix up our current town home to sell. The reason is simple - we’ve outgrown out current house and kids make it impossible to keep clean. We are busting at the seems.
We are fortunate enough that we can put down 30% on a new house and still cover both mortgages, even if we lose our jobs, for over a year comfortably.
I believe we’d also have the option of taking some of our proceeds from the townhouse and recast into the new mortgage to bring the payment down if desired.
Is this crazy? Am I creating risks for myself (besides two mortgages) that I need to be aware of with taxes, etc? My wife and I are super risk averse so trying to figure out all possible pitfalls in advance.
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I did something similar and I could not afford 2 mortgages for a year. Selling an empty house was way less stressful than having to show the place we were living in with our animals.
We got the old place sold in 3mo and then recast our new loan with the sale. It was great and I would do again.
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Nope that works well for a lot of people.
Probably the only risk is that the market takes a huge fall between the time you buy the new place, and sell the old one (so you net less than you want on the old place). Probably pretty low risk in most markets though, if you move quickly you should be fine.
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No, this is not crazy. This is how about half the buyers/sellers do it. The other half can’t afford to buy before they sell, so they have to figure out how to keep a house in showing condition with kids, and pets, or just themselves putting dishes away.
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Think about how much more you’ll actually gain by fixing up your current house. Is it really worth all the time, effort, and extra money you’ll have to spend? Or would it be smarter to just sell it as it is, pocket the cash, and either invest it or pay down your mortgage? The new owners can then make the changes they want.
When I bought my first starter townhome, I was put off by how some people tried to fix it up. They often did it cheaply, took shortcuts, and chose colors I didn’t like, but still wanted a high price for their work. I decided to buy one that needed some work so I could make it my own.
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It won’t be big things. Kids put lots of holes in the wall in the last two years. If it took a handyman more than a day I’d be surprised.
The biggest thing is our stuff is everywhere.
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Currently going through the same process and supposed to close in a few weeks. Fingers crossed everything goes well and we close on time.
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I have done that twice now… Last time was back in 2022. I bought a new house while still living in current house. Got a friend to sign a fake lease so that the lender thought we rent d the house out. Fortunately, me and wife make earn a good living and can afford both mortgages. We moved in to the new house 4 months after closing and I sold the previous house 2 months after.
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That’s exactly what we’ve done with our last three home buys and sales. I’ve been a Realtor for 19 years, so I’ve got a lot of experience helping people figure this stuff out. I really like this approach, especially if you have a safety net, which it sounds like you do. If you’re pretty sure your current home will sell quickly—maybe within 90 days or so, depending on your local market—it gives you the chance to take your time finding the “perfect” new place.
You’ll be in a better position to negotiate on your next home since you won’t need to sell your current one first. This could save you thousands! Plus, it takes a lot of pressure off when showing your current home. Sure, there might be some extra costs for owning both homes for a little while, and there’s a tiny chance something weird could happen, like a broken pipe or a break-in, but that’s really rare. You probably already know if there’s anything to worry about with those kinds of unexpected issues. Hope this gives you some more things to think about!
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Thanks! Most homes in my neighborhood have gone under contract in under a week but planning for whatever it takes.
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I went through this recently, and let me tell you, the mortgage company really made it tough for us because they were worried about us having two mortgages. Be ready for a ton of financial questions and a lot of back-and-forth just to get approved.
Also, where are you getting that 30 percent for the down payment? If you’re selling stock, keep in mind you’ll have to pay capital gains tax. But if it’s just sitting in cash, you should be fine.
Honestly, I found it way less stressful to move out first and then list the place for sale.
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I’m doing that right now! I’m closing on my new home this Friday, and then I’ll start fixing up my current place to get it on the market by the end of the month. My new mortgage doesn’t kick in until November, so I might not even end up with two mortgages at all.
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