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Here's our situation: we presently own a home worth about $365,000 and our mortgage balance is $65,000. We pay extra on the principal every month but the "real" payment is $1166 PITI.
We would like to downsize to a house in the $250,000 range and pay cash. What I'm worried about is if we bought before our current house was sold. Could we get a $250,000 HELOC on the present home to do that, to be paid off when present home closes. Our combined income (Federal Civil Service retirement) is about $5,000. I'm also taking $500 a month in IRA withdrawals and I get $193 a month Social Security. Our only debt besides the house is $466 car payment. (My husband also receives a VA disability check but he is kind of funny about it - does not like to mention it and as of yet has never put it down as a source of income on an type of loan application. I mention it only that if push came to shove we have more monthly income we could potentially use)
Would this be doable or are there other solutions we could consider?
We have not done anything yet either in the selling or buying side. Just "researching" right now.
Here's our situation: we presently own a home worth about $365,000 and our mortgage balance is $65,000. We pay extra on the principal every month but the "real" payment is $1166 PITI.
We would like to downsize to a house in the $250,000 range and pay cash. What I'm worried about is if we bought before our current house was sold. Could we get a $250,000 HELOC on the present home to do that, to be paid off when present home closes. Our combined income (Federal Civil Service retirement) is about $5,000. I'm also taking $500 a month in IRA withdrawals and I get $193 a month Social Security. Our only debt besides the house is $466 car payment. (My husband also receives a VA disability check but he is kind of funny about it - does not like to mention it and as of yet has never put it down as a source of income on an type of loan application. I mention it only that if push came to shove we have more monthly income we could potentially use)
Would this be doable or are there other solutions we could consider?
We have not done anything yet either in the selling or buying side. Just "researching" right now.
You need to talk with a lender.
Assuming your qualifications are OK, you will probably be limited to 75/80% of your value in a HELOC.
Assuming the $365000 is reasonably accurate, that puts you at $292,000 maximum.
Minus $65000 current debt, probably at $227,000 HELOC credit line.
And....
I am willing to be corrected by any of the lenders.
Here's our situation: we presently own a home worth about $365,000 and our mortgage balance is $65,000. We pay extra on the principal every month but the "real" payment is $1166 PITI.
We would like to downsize to a house in the $250,000 range and pay cash. What I'm worried about is if we bought before our current house was sold. Could we get a $250,000 HELOC on the present home to do that, to be paid off when present home closes. Our combined income (Federal Civil Service retirement) is about $5,000. I'm also taking $500 a month in IRA withdrawals and I get $193 a month Social Security. Our only debt besides the house is $466 car payment. (My husband also receives a VA disability check but he is kind of funny about it - does not like to mention it and as of yet has never put it down as a source of income on an type of loan application. I mention it only that if push came to shove we have more monthly income we could potentially use)
Would this be doable or are there other solutions we could consider?
We have not done anything yet either in the selling or buying side. Just "researching" right now.
Is your existing mortgage a VA loan?
Also, would you be comfortable, having bought with cash, covering moving expenses, then the OLD house payment (and utilities/upkeep) along with utilities/upkeep, insurance, etc on the NEW house?
Our current mortgage is a conventional loan. This HELOC scheme I'm hatching would just be a stop gap measure, maybe two or three months max. We have enough $$ in IRAs we could cash them in and pay cash for a new house today, but don't want to take a big tax hit taking it out all at once. (Not age penalty, I'm 62 and Mr. Dokie is 69.).
I assume our qualifications would work. Both our FICO scores are north of 800.
Why not list and if you find something, take a mortgage out on the new home. Pay it off once you sell. Basically the same difference as your current plan.
Or see if you could get a bridge loan.
Why not list and if you find something, take a mortgage out on the new home. Pay it off once you sell. Basically the same difference as your current plan.
Or see if you could get a bridge loan.
Why on earth would I want to mess with getting a mortgage (and all the associated expenses) just to pay it off in a couple months? We have lived frugally and done without a lot of extras just so we could get to this point.
I'm worried about the timing because there's a good chance we're going to have to build but recently houses have been selling in a couple of weeks.
Why on earth would I want to mess with getting a mortgage (and all the associated expenses) just to pay it off in a couple months? We have lived frugally and done without a lot of extras just so we could get to this point.
I'm worried about the timing because there's a good chance we're going to have to build but recently houses have been selling in a couple of weeks.
It's been a while but my recollection was that the HELOC application process was comparable to a mortgage application.
But as someone who built new construction while already owning a home, my recommendation is that if that's the route you go, accept the necessity of needing to sell your existing home and deal with a second move. New home builders are notorious for missing projected closing dates, and the odds of being able to do a simultaneous close on both properties is low and extremely stress inducing. Sign your contract, get the current place sold, bank the money and wait for the new house to get built without the pressure of hoping nothing disrupts the timeline and with high odds that in the end, you end up having to do an unplanned move anyway, when you don't want to lose your buyer by not being able to convey when you are supposed to.
Why on earth would I want to mess with getting a mortgage (and all the associated expenses) just to pay it off in a couple months? We have lived frugally and done without a lot of extras just so we could get to this point.
I'm worried about the timing because there's a good chance we're going to have to build but recently houses have been selling in a couple of weeks.
Nice attitude. You asked for advice and opinions, but I guess you were really looking for someone to confirm your plan.
You are wanting a HELOC. Not a big difference between the processes or costs. To me, it'd be far simpler to just get a mortgage and pay it off. And, as MikeJaquish pointed out, you probably don't have enough equity to take out a HELOC for $250k. With a mortgage on the new property, you could do a low 3% down loan, getting you much closer to the $250K than the HELOC likely will.
Or, as I said before, look into seeing if a bridge loan is possible.
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