Making the Move (Between Mortgages): What You Need to Know
Buying your first home is a big step. Buying your next one can be just as exciting, but it can also be a bit more complicated. In addition to handling all the logistics of a move, there’s the business of getting out of one mortgage into another one.
The transition between mortgages can get tricky, especially depending on the state of the market when you’re selling and buying. Still, it’s certainly doable, provided you go in with a smart approach.
Know the Market(s)
The challenges involved in moving from one mortgage to another depend in large part on whether you’re making your move in a buyer’s market or a seller’s market. In a seller’s market, you’ll have less of a problem selling your existing home—and freeing up money for your new mortgage—but purchasing your new home may be more difficult than you’d like. On the other hand, in a buyer’s market, you may have no problem finding your new home, but selling your old one could be the challenge.
Depending on circumstances, you could find yourself all set to move, but with nowhere to go, or ready to move into the home of your dreams, but without the money you need to pay for it. Neither one is ideal, but both can be navigated.
Know Your Options
If you’re in a buyer’s market, a contingency clause may be an option to put in the contract to purchase your new home. It makes your purchase of the new home contingent on finding a buyer for your existing one so you won’t be stuck with two mortgages at the same time. While it’s not ideal for the seller (since it may mean waiting longer than they intended to sell), a buyer’s market isn’t ideal for them in the first place, so they may be more inclined to accept the clause.
If that doesn’t work, a bridge loan may also be possible, either from friends and family or from a financial institution. In this instance, you take out a short-term loan on your existing home, use it to make the down payment on your new home, and then pay the loan back when your existing home sells. A bridge loan can be expensive, though, and difficult to qualify for, since you need to have enough income to pay both mortgages indefinitely.
In a seller’s market, your advantage is the knowledge that you probably won’t have a hard time selling your current home—and often at the price you want (or even higher). With that knowledge, you can confidently pursue your new home, and start the process of selling your existing one once you know where you’re going.
Sometimes, however, that isn’t possible, particularly if you’re making a long-distance move and have to negotiate the start of a new job, school, or some other scheduling concern. In this case, your best option may be to sell your existing home, find a short-term rental home, and put any belongings that you don’t want or need to bring with you into storage until you find your new home. The problem is that short-term and month-by-month leases are usually more expensive than leases lasting a year or more (which may also be an option, depending on your situation). Still, if you need to move quickly, that may be a problem you’ll just have to deal with.
Know Where Help Is
Friends and family may not be real estate professionals, but they can still be a source of help. In some cases, they might have knowledge of short-term housing options that offer better terms than a rental property company, such as situations where the homeowner is on an extended trip and needs a caretaker, a guest house on someone else’s property, or even a home that someone else is trying to sell.
When it comes to finances, though, stick with the professionals. One of your best sources of help and guidance is the FCB Texas mortgage team. We want to help get you into the home you want, and we’re available to help you navigate your options.
Ready to talk? Contact us.