HELOC – You have Equity in your current Home
Is it enough to put 20% in the new home you desire? Why not get a home equity line of credit (HELOC?)
You extract this line of credit, all or part, and utilize for the down payment and closing costs for the new home. Once your home sells, your first mortgage is paid off if any balance, along with the HELOC and you walk away with the remaining proceeds. You nailed it with the 20% or more down, avoided any PMI, and took advantage of the interest rate while they remain low, We have a solid plan here.
Say you have a current 15-year mortgage on a current home. Yes, your payment is a bit steep. Especially if you want to buy or have to buy a new home first then sell the current home. How about getting an equity loan. Not only pull enough to put the down payment on the new home, but enough to have this HELOC take first lien position.
We not only pull the equity but enough to pay off this 15-year mortgage you have. So now your 15-year mortgage payment is gone. We have enough for the down payment on the new home. The payment on this entire new 1st lien HELOC is much lower than the original 15-year mortgage. This really frees up cash flow as we transcend into this buy first, then sell later strategy.
Absolutely rock solid strategy that works almost too well
Caution: If the home is currently listed, no bank will allow you to extract an equity loan or HELOC. So if we need to utilize this strategy we must first execute the HELOC prior to listing your home. More reason to make the plan first, then execute with precision.
We work with several banks that will allow you to extract this equity knowing you will soon sell the home.
Own a second home or investment property?
Those who own investment or second homes may be able to extract equity to buy a new home. Yes, if you have one of these types of properties and have equity, we may be able to conduct a cash-out refinance to get cash in hand. You may also utilize a HELOC as discussed on the previous page to secure funds for the closing. These are both great strategies!
If you are selling a home and not netting the expected 20% down for the new home, proper strategizing is in order. At times one strategy may lower the selling price on your current home. Many sellers do not want to do this as they think they need the proceeds to buy a new home. Price drops, in many cases, allows one to move forward quickly and in the long run, makes more economic sense. If we hold out for a few more thousand dollars now, may cost tens of thousands later.
HELOC’s allow a seller to hold out for a potentially higher price while moving on with objectives. Without a HELOC in place, if needed, takes away a very important tool from the toolbox of the Craftsman. That Craftsman being you.
Again, we have a lot of moving parts and need to fully understand our plan before we implement.