I am always amazed when people own two homes

[DawnM]

at a time.

 

We have a significant amount of equity in our current home and I can't imagine what it would look like to take out a loan (even with 20% down which we could come up with) and then sell this house and have all that equity not go towards the next home.

 

However, I would LOVE to buy, move, and then sell our current home without having to live in it while selling.

 

How do people do that.

 

Do people not have a lot of equity?  Do people just take the equity and put it towards the principal after they take out the loan?

 

I also know we can't buy as much house if we don't sell first.  We can't do two large mortgages at once.

 

I brought up renting a place while we sell, but around here, if you aren't wiling to sign a 1 year lease, your options are very limited and month to month rentals are very expensive ($1,650 for a 3 bedroom townhouse that allows our dogs.)

 

Just curious how people do it.

[Carrie12345]

Savings.

High income.

Low COL.

 

And timing is everything.  Today, I could afford to buy two houses similar to mine.  Maybe even 3 if we scrimped elsewhere!  But that's because my house is only worth about 60% of what it went for 10 years ago.

 

Our neighborhood is full of many people's second homes, though most have gravitated more toward renting to vacationers to offset costs.

[Mama Geek]

We don't own 2 homes but dh contracts away from home for months at a time and we go with him which means we rent apartments or stay in hotels. We made decisions to change from working direct to working contract a couple of years before dd came along and we changed which industry we were working in to a much higher paying industry.  That got us totally out of debt and now several years later we have a pretty good amount of savings and only dh works.

 

There are good and bad to the way we have been doing things.  Right now the market dh is in is really down and he is unemployed.  We are happy about having time to be home over the holidays, but after the first of the year things are pretty uncertain as far as what the next job will be.  So far he has gotten all his work through his connections.  We hope that will happen again this time.

 

ETA We have retired family and friends that bought houses in a low COL area with no state income taxes and moved their residency there and kept their other place. This was cheaper than paying state income taxes on their retirement income to their original state.  They are snowbirds.

[marbel]

Well, we did it once when we were moving.  I don't remember the details but look up "bridge loan" which I think got us into the new house and was paid back with equity from the old house once it sold.  

[Pawz4me]

We're looking for a new (to us) house.  Our plan is to buy first, move and then put our current house on the market. We have quite a lot of equity in our current house, but we have enough savings/liquid investments that we can make a down payment equal to the amount of equity we have and pay ourselves back when our current house sells. DH also makes enough that we can afford the payments and upkeep on two homes.  The ability to do that is due in large part to how small our current mortgage payment is, and that we have no other debt.  Two other factors are that houses are a lot less expensive than in other areas, and we're looking to down size this time (although I'm not sure what that will look like--it appears we may down size in square footage but maybe not price).

 

In the past we've also done a bridge loan.

 

We considered renting, selling this house and then trying to find something to buy, but the cost of nice rentals is more than our total monthly cost of keeping this house.  And of course a large part of our mortgage is going toward equity, which reduces the real cost of keeping this home. So renting would be a worse financial move than owning two homes for awhile.

[TammyS]

I've known people around here to rent a vacation home in the off-season, which is relatively cheap, to give them some time to get their home sold (this only works, of course, if you can feel reasonably sure your house will sell before the vacation season starts).  One family I knew took their travel trailer to a long-term rental campground (which was full mostly of retirees who live there 10 months of the year) and stayed there while their house was on the market.

[madteaparty]

We could theoretically do this because our current home was bought for nothing as a vacation property while we rented in NYC (yes we bought weekend place before primary place--we do everything backwards). We loved it so much we moved in full time. Now we have to move for high school to a similarly picturesque area so we have to sell this house (DH refuses to maintain two gardens/lawns/woods). It will never sell (rural area) so the likely scenario is that we will rent for most of Ds's high school. Which I'm cool with. I'm not going to be burdened by two mortgages, even though the first one is tiny and we have paper equity built up owing to all the renos we made.

[Spryte]

We just did this. But we are in a hot market (though not as hot as some I've seen mentioned here on the boards, hello YA!), and we knew our old house would sell quickly. We had a back up plan to use it as a rental by a certain date. For the down payment, we used savings.

 

Here's how it went down: we found our house, which had been on the market for three days. We competed with other offers, and "won." We got our old house ready to show/rent, packed and moved into the new one immediately after closing. We closed quickly, as our sellers were moving and our loan was very clean. Old house immediately went on the market. In 13 days we had the offer we wanted. Buyers paid cash, so no loan paperwork to wait on, we closed in 2 weeks. It was very fast, very straightforward. I worried that we'd have two mortgages, of course, but we had a plan to use it as a rental - and we'd have made an income on that, so knowing our back up plan helped with anxiety.

[PrairieSong]

We live in a lower COL area. When we were first married we bought a small, cheap house. When DH started his own business his income grew a lot so we saved and were able to put a good-sized down payment on a bigger house. We had our house on the market while we lived in it (a big pain with five young kids at the time!) but it didn't sell until we moved out of it.

[DawnM]

We have enough for a decent down payment, but DH won't touch that account.

 

I think there is security in knowing exactly how much you will be getting for your current house in order to make the best decision on the next. At least for DH.

 

Our market is good and strong but nowhere near what the last market we had was. House often sold in hours in ca when we last sold.

 

Here, You need to keep your home immaculate. It is very hard for me, but we may have to. I plan to get a storage unit, large one, and start loading it in January for a March projected list date.

 

But, thanks for the idea of a bridge loan, I am going to at least look into it. I hadn't heard of those before.

Edited November 19, 2015 by DawnM

[Scarlett]

Well, we did it once when we were moving. I don't remember the details but look up "bridge loan" which I think got us into the new house and was paid back with equity from the old house once it sold.

This is what we did.

[MEmama]

We've done it twice while moving internationally. Not fun and certainly stressful, but luckily it worked out both times and we were able to sell the original homes before paying double mortgages. We could have swung it, but better that we didn't need to.

[DawnM]

Savings.

High income.

Low COL.

 

And timing is everything. Today, I could afford to buy two houses similar to mine. Maybe even 3 if we scrimped elsewhere! But that's because my house is only worth about 60% of what it went for 10 years ago.

 

Our neighborhood is full of many people's second homes, though most have gravitated more toward renting to vacationers to offset costs.

Honestly, I feel like we have most of that, although I don't know that our area is considered as low COL as it used to be.

[Mom22ns]

We plan to do this the next time we move. Our home is paid for, so we plan to buy a home with a mortgage, then pay it off when we sell our current home. Our home is on acreage and is two stories. We plan to move to a lower maintenance one story home to retire some day, but not yet. Right now, we're just focused on paying for college. :)

[Farrar]

I've known several people who have a second house, but the second house is a small vacation property out in the middle of West Virginia. Which... if you make middle of WV wages is probably real money, but compared to the price of a home here in the city, seems sort of like not a real home price.

 

Other people I've known end up needing to buy a new home and are able to keep the other one as a rental property and make a little money on it. This is how my mother has two homes. I know other people in that situation.

[bolt.]

That's usually done through "bridge financing" -- basically, you put your home for sale, with the idea of securing a possession date that's not too soon.

 

While people are looking at your home, you look at other homes, and get pre-approved for a new mortgage and a bridge loan at the same place you currently have your existing mortgage. This pre-approval is based on "if/when" you have sale agreed on your current house.

 

Whenever your current home sale is agreed-to (legally binding), then the bank agrees to lend you the full amount to buy a new home -- in a combo of two loans: the mortgage (which continues) and a short-term loan equivalent to what you will get for your old house when it changes hands (at the already firm possession date, for the agreed price).

 

Then you make offers, but your new place, and move in.

 

So, for the shot duration you have 3 loans: 2 mortgages and a bridge. However, as soon as your old place's sale is completed, the bank immediately gets the proceeds; which pays off your bridge loan in full. You proceed with one mortgage on the new place.

[skimomma]

We did it.  We had a good chunk of equity in our first house.  This was before the housing crash so I don't know if you can do this anymore, but we were able to take out a HELOC on our first house to use as the down payment on the second.  Then we rented the second house on a month-to-month until the first house sold.  We took the proceeds from the sale of the first house to pay off the HELOC and slap a bunch down on the new house.  It was stressful so I don't think we would do it again and we were really REALLY lucky our first house sold because we could not have carried the upkeep on both places for very long.  We were also forced to take a 30-year loan on the second house because we could not carry both mortgages with a 10 or 15 year loan.  Luckily, interest rates went WAY down and we were able to refinance for a 10-year loan a few years later.

 

Looking back, I would not do it again.  We opened ourselves to a lot of risk and headache had that first house not sold.  It was an "odd" house that required the perfect buyers.  Luckily they materialized.  We were young and did not realize how risky it was.  We are considering a move within the next 5-10 years and we will for sure sell before buying.  I would much rather move into temporary lodgings with our stuff in storage than deal with the risk.  Houses in my area can sit on the market for YEARS.  Even though we will own our home free and clear by then, I would still prefer to have it on the market while we live in it.  Plus it is good incentive to keep the house clean:)

[MysteryJen]

We are in the middle of this. We moved out into my dmil's house. We are waiting for the old house to sell, so we can buy into a much hotter market. Because we have a place to live, we are not looking at bridge loans just yet.

 

But we might, if we find a great house, because where we are looking, no one will take a contingency offer.

[Katy]

DH's employer moves employees around frequently.  Part of the relocation package covers a sales agreement for the home - if your home doesn't sell in 60 or 120 days they will purchase it, that purchase agreement allows you to get a loan on a new home even if you don't have a large amount of cash available. There are requirements- they pay 5% under appraised value, property must be under 5 acres, must not have mold, water damage, lead paint, asbestos, etc...  And they cover moving expenses, trucks, and give a cash bonus that more than covers the double payments, multiple trips back and forth, hotels, restaurant meals, etc.  And then when it's all over you submit receipts and they cover all of those expenses again so you end up with an extra large amount in your savings account (and extra owed for taxes in April).  It's stressful but doable.

[TranquilMind]

at a time.

 

We have a significant amount of equity in our current home and I can't imagine what it would look like to take out a loan (even with 20% down which we could come up with) and then sell this house and have all that equity not go towards the next home.

 

However, I would LOVE to buy, move, and then sell our current home without having to live in it while selling.

 

How do people do that.

 

Do people not have a lot of equity?  Do people just take the equity and put it towards the principal after they take out the loan?

 

I also know we can't buy as much house if we don't sell first.  We can't do two large mortgages at once.

 

I brought up renting a place while we sell, but around here, if you aren't wiling to sign a 1 year lease, your options are very limited and month to month rentals are very expensive ($1,650 for a 3 bedroom townhouse that allows our dogs.)

 

Just curious how people do it.

You can put an equity line on your current home for the short term.  Take out the down payment and put it down on the next, close, then prepare and sell your home in the spring.    This assumes you have sufficent income to carry the two for a bit.  Because yeah, it's not fun paying two mortgages and two sets of utilities.  You have to turn on gas, water, and electric, at the very least, in the home in which you do not live. 

 

You could also move in with a relative short term or a hotel, but that seems like a big hassle. 

[Reefgazer]

This.  We own two homes, and one of them is in a low COL area.  When we bought it we had a wad of savings, and (pre-kid) comfortable incomes.  When we were in the market to buy a house where we now live, that first house was all paid off and it has relatively low taxes, so we kept it as a place to stay when we vacation up there.  We had intended to use it as a retirement home, but we bought acreage to build a new retirement home on when the time comes.  At that point, one of the three properties (surely the one we live in now in the highest COL area) will be sold.

Savings.

High income.

Low COL.

 

And timing is everything.  Today, I could afford to buy two houses similar to mine.  Maybe even 3 if we scrimped elsewhere!  But that's because my house is only worth about 60% of what it went for 10 years ago.

 

Our neighborhood is full of many people's second homes, though most have gravitated more toward renting to vacationers to offset costs.

 

[Arcadia]

My first home's price went up so much that if we had sold it, we would not be able to buy something similar if we go back to my hometown so we kept it.

 

If we move, we would keep this one as rental because the area is a high rental area and our kids may need the home if they end up working in Silicon Valley.

[Guest]

We have moved then sold each time we have moved. The reasons were these:

1.  We moved out of city; home city was in recession and property values were through the floor.  We bought with a mortgage in a new city, and rented out the old house for eight stinkin' years. (YUCK)    During that time we had a windfall (boom era) and paid off mortgage.  

 

2.  With rest of windfall, we bought a new, bigger house for cash, moved to it, then sold old house.  

 

3.  We moved out of THAT house to a rental, sold that house while we looked for a new downsized house.  Bought THIS house for cash.  Total rental time 10 months.  

 

The thing that enabled all of this was a windfall.  For some people, this comes in a financial uptick, for others, through an inheritance or family gift.  Without the windfall, we would not have been able to do this.  That said, if/when we sell THIS place, I will do the rental-in-the-interim thing again.  I can't live in a house that is on the market--it's too much work.  

[mamiof5]

We owned 2 houses for a long time, one where we live and the old one (which we rented). Eventually sold the other one a couple years ago and made a bit of profit. Very glad we sold and hopefully will never have to own two houses again!

[mtomom]

We took out an equity line of credit on the old home and used that to finance the new home. This meant we couldn't rent the old home and it's theoretically risky in that the equity credit lines can have huge interest rate fluctuations, but it worked for us. We believed we could sell the first home within 6 months or I probably wouldn't have done it.

[ThisIsTheDay]

 

Just curious how people do it.

 

We bought our current home before selling our old home.  We lived in the first house for three years and did not have a lot of equity.  We knew we couldn't sell the first house in time if we wanted the second.  We also knew we'd take a hit on the first house.

 

We had enough from another source to come up with 20% down for the second house. To meet the bank's loan requirements, we had to have a signed lease for the first house before we could get the loan for the second.  It was a stressful couple of weeks, juggling all of that.

 

We rented out the first house for a couple of years.  While we didn't make any money on it, at least the mortgage was being paid down. When the housing market picked up a bit, we sold it, and we came out just a few thousand dollars ahead, at least on paper. We were just glad we didn't have to come up with cash at closing.

[Suzanne in ABQ]

We've done it.  We decluttered/cleaned/staged our house, and put it on the market.  It sold within a couple weeks, but we set the closing date for several weeks ahead -- 60 days, I think.  Meanwhile, I went shopping in the new place, and bought a house within the week.  We were able to align both closing dates so we could move directly out of the old house and into the new.  That was in 2000, though, so the market was much different.

 

The last time we moved, we cleaned/decluttered/staged our house, then went on vacation.  The house sold while we were gone, but we didn't have anything to move into because our new house was still being built.  We closed on the old house, put our furniture in storage, put our money in the bank, and lived with my mom for a few months.  When the new house was finished, we put almost all of that equity into the new house.  

[rebbyribs]

We just did this.  Our first house, we owned outright.  We bought during the recession and were very conservative about what we could afford.  Afterwards, DH got a better-paying job, and we paid off the house in about 5 years.  The downside was that it was a relatively small house (2BR / 1BA 1000 sq ft).  When we bought it, we had one child and I had just learned that I was pregnant with our second.  I had no idea it was twins and would not have thought we would have a total of 5 children 5 years later.  We were a bit smooshed.  :-)

 

Two years after paying off the first house, we had enough savings to make a downpayment on a larger house.  We were able to buy a larger, fixer-upper house and spend a couple of months getting it move-in ready.  As soon as we had moved, I got to work cleaning and painting the old house.  It sold within 2 weeks of listing, for much more than I had expected.  The proceeds from the first house ended up being enough to cover most of the mortgage on the second house.  

 

It was VERY nice not to have to get the first house show-ready while we were living in it.

Edited November 20, 2015 by rebbyribs

[DawnM]

Thanks guys.

 

We don't have any relatives anywhere nearby to live with, so that isn't an option.  We would need to rent something.  This isn't a vacation area either, so people don't come here to do anything but stay in a corporate type hotel.   There are corporate apartments, but they don't allow dogs and are around $2800/month.

 

There are a few places that rent month to month.  Last I looked, they had no openings, but I don't need them right now, so I will check back.

 

Wonder what the penalty is for breaking a lease?  If it is just losing the downpayment, that might not be bad.

 

DH just feels the risk is too great to not sell first.

 

However, I think my best bet really is to get the largest storage I can get, put 80% of our stuff in it, live in the house as if we were camping (one plate per person, etc...) and have the house as empty as possible, and try to keep it clean.

 

At least if most of our stuff is in storage, if we have to rent for a while, we won't have to deal with too much stuff.

 

 

Edited November 20, 2015 by DawnM

[KungFuPanda]

We probably should seriously consider moving, but the thought of packing up and keeping our house show-ready is paralyzing. We'd HAVE to move temporarily first. I don't know how else we'd deal with the dog and his hair. Also, it takes us at least 30 minutes to get out the door! I have a kid in a wheelchair and everything just takes us longer. Adding a room to this house feels much less daunting than moving. My mom lives in WV. I really think it would be cheaper and easier to rent near her for a month or so than live with constant showings in our area. I DEFINITELY don't want to dream about the next house until I KNOW this one has sold. It feels like emotional gambling.

[DawnM]

Talked to DH.  He said absolutely not on the bridge loan.

 

Honestly, the way he is with money, he probably wouldn't even agree to buying another house if we currently had no mortgage, unless we had saved up 100% of the next house as well.

 

Sigh. 

 

We just will have to wait, live in the house while we sell, and suffer through.

[amy g.]

We are in the same situation. This house in Texas is ALMOST ready to list. I'm keeping the dogs in a crate, but taking them out to run around every hour and walking them a couple of miles morning and evening. It isn't ideal, but until the house sells, there can't be tufts of dog hair floating through the air and doggie smell on the furniture.

 

My neighbor set up a space for us over her garage where I can bring the kids and the dogs when there is a showing.

 

I've given each kid a couple of rooms that they need to make sure are spotless before they go to sleep each night.

 

That is the best we can do. Sure, the house would show better if we moved out first, but I don't want 2 mortgages so this is just how it is going to have to be.