Buying a home while selling the one you are living in can be a challenge.
It can turn out to be a big nightmare if you are looking to sell your house then find out right before closing that the buyer can’t get a mortgage for some reason, and the deal is off.
If you have already moved out into a new home, it can even be a bigger nightmare as you’ll fall into the dual-mortgage trap.
It’s never easy to be hooked on a new home while also paying an existing mortgage, even if it’s for a short time.
Fortunately, that nightmare can be avoided if you use the following strategies.
How To Avoid Two Mortgages After Buying A New Home
1. Sell Your Home To An iBuyer
You can get an offer on your home instantly by selling to an iBuyer. If you’re already in contract on a new house, but the purchase is contingent on selling the existing house, the iBuyer model can get you a cash offer within days, and if you accept the offer, you can close in a week.
This gives you quick cash for your current home so you can afford to close the deal on a new property. Further, the home seller has control over choosing a convenient closing date that suits their schedule.
Once the sale is finalized, it’s the responsibility of the iBuyer to resell the property, meaning they will handle all the necessary repairs and renovations and assume the risks involved in getting the house ready and primed for sale. This offers a simple, convenient, and certain way to sell your house quickly and with minimum fuss.
2. Request Your Trade-In Offer
The trade-in offer approach will provide a competitive offer on your current home and give the option of buying a new house from the iBuyer marketplace or outside listings, including MLS and new builds. If accepted, the iBuyer coordinates the sale of your current home with the purchase of your next home, this is how to sell your house and avoid multiple mortgages.
3. Draft a Rent-Back Agreement
A rent-back agreement can make it easier to time your move. The buyer of your home agrees to extend your stay for a period of time, usually (60 to 90 days) after the sale is finalized. This will require a measure of good faith between the buyer and seller.
4. Write a Contingency Into Your Contract
This helps ensure buyers aren’t taking an extra mortgage by demanding the sale of the existing house before buying a new one. The strategy, however, increases the risk of buyers losing out on the houses they want to buy as many sellers won’t accept contingency offers, and even if they do, they could end up selling to the next buyer that comes with a better offer.
5. Get A Short Term Bridge Loan
A bridge loan is a short term loan that allows you to tap into the equity of your current home to pay off the old mortgage and down payment on your new home. These loans often carry high-interest rates, and if your home doesn’t sell quickly, you may be stuck with hefty loan payments on top of your mortgage payment.
Home Equity Loans
You can also opt to get a home equity loan or HELOC. You, however, may not be able to put your house on the market right away as these loans are generally for existing homeowners seeking to make home improvements or consolidate higher-interest debt. Others also, opt to get a short-term loan from friends or family members to cover the down payment and closing costs. If you are looking to finance a second property you can read up on how to get a loan for a rental property.
More importantly, speak to an experienced real estate agent who can help you understand the current real estate trends as well as the challenges and benefits of buying and selling a home in your current market.