We bought our first home two years ago for $375k, which is a typical starter home for all intents and purposes. We planned on living there for 7-10 years and then moving to our “forever home” that checks all our boxes and would be where we raise our kids.
A house came on the market that is checks all our boxes, especially being on a body of water. It’s also prices extremely well. Much better than it will be in 8 years. Lake homes in the area currently go for $800k starting and this house is priced at $650k which is why we’re seriously considering it because it would take away the stress of trying to afford a very expensive home in the future that checks all our boxes.
If we were to want to pull the trigger on this house, the questions becomes how we put down a decent down payment before selling our current house so that we can have a relatively manageable monthly mortgage. This may be trivial, but we’ve never bought and sold a house. I’m also worried about the potential loss we may be take on selling a house that we’ve only had for 2 years.
Open to any and all suggestions. This may be a silly ask but I’m trying to learn and gather all datapoints to help.
Edit:
We have about $65k in equity we’ve put in our current house. I would hope the house has appreciated some. We have $30k in savings. I have $35k in a taxable brokerage account. My wife and I have $150k in 401k and Roth IRA combined but we’re not touching those ideally
Bought our first home two years ago, and a great deal presented itself for our forever home. Where not sure what steps to take.
byu/CoookieHo inRealEstate
Posted by CoookieHo
10 Comments
Do you have equity in your home? How much? Or you have savings for a down payment?
What is the equity in your current house? If you can sell that and use the equity for the downpayment on the dream house it may help
Do you have any equity? And would you qualify for a HELOC or home equity loan you could use to get the down payment and then pay off when you sell your current home?
It depends on your age, credit scores and assets. I would also want to be pretty certain your current house is an easy sell. If you think the lake house is a good deal, others are thinking the same thing. I’ve got a fairly decent nest egg, the bank let me take out a line of credit against that, enough to help put a decent down payment on the ‘new’ house. My current house will (hopefully) sell at a slight profit after 5 years.
If you are not sure if your current house will sell, or if you might lose money, maybe it’s not a great idea. IMO your plan will only work if you know you can sell quickly and not lose money. Good luck!
Talk to your finance guy about a bridge loan or other options.
Talk to a realtor about what your home is worth.
Also try not to close until 2 years after your last closing date on else I think you might pay higher capital gains tax
Ok. If you absolutely love this other house then you should go ahead and buy it. I assume you have the income to support that. Then you need to do a cold hearted assessment on the house you currently live in. For a conservative estimate, assume it will cost you (hard money cost) 7% of the sales price when you sell it.
Then you need to hook up with a loan officer and see what they can do for you. Be specific and honest when you talk with them. Again, I assume you have the wherewithal to pull this off. Figure you will lose $35k on the sell. To me that is a cost I would be willing to pay for a dream house
Why is the water front home priced lower than comps? There’s usually a good reason that would end up making it not your dream home.
If the home is such a great deal, it won’t last for you to figure this out. If nothing else an investor or realtor will buy it. If it lasts, then it’s staying on the market for a reason and you probably don’t want those problems unless you have significant excess cash for repair.
This is a risky move.
– You can put in an offer contingent on the sale of your existing home. The only way a seller is going to accept that is that you are paying more than others that are not contingent on the sale of an existing home
(i.e., you are paying over market for your new home.)
– you can get a bridge loan if you have the income to qualify for both homes, concurrently.
Just keep in mind that there is always a dream home out there. You aren’t talking about shifting your timeline a couple of months, you’re talking about jumping into a much larger home years before you planned to and there is a true cost of that. Right now you’re looking at potential appreciation of this property in eight years and that if you wait to buy it, you will have to pay more. But you are discounting all of the saved costs in utilities, maintenance, and taxes, on a smaller more reasonably priced home, not to mention the increase in your investment portfolio and the stress reduction of living below your means. The longer you wait the more you save, and when you are ready to upgrade another forever home will come on the market.