After figuring out exactly how to time the sale of your old apartment and the purchase of your new one, let’s talk money. The number one concern? How do you get a mortgage if all your assets are still tied up in your old home?
We talked to Elise Leve, Senior Mortgage Banker at Citizens Bank, to find an answer to the big question, where do I get the money?
As an experienced mortgage professional, Elise has worked with countless clients that faced the challenge of handling two transactions at once, so she has several solutions to this tricky situation.
Option 1: Buying Before Selling
If your seller is flexible, which is unfortunately rather rare, you might be able to buy before you sell. “This is all about finding a seller who doesn’t mind that your purchase is contingent upon the sale of your place,” explains Elise. This way, you’ll be able to go into contract for your new apartment before all your assets are actually freed. This is a win-win since your search will be over, but you won’t be stressed out about having to sell your old home.
“Another option is finding someone who will be willing to co-purchase with you. This means that both of you will be carrying the mortgage. Your seller will feel more assured this way and you won’t be struggling to come up with the money before your time,” suggests Elise.
Option 2: Selling Before Buying
“The less complicated way to go is to sell before you buy,” says Elise.
Here are the steps you need to take, familiarize yourself with the market and find a few apartments that fit your criteria. Then, put your property on the market, knowing that you will be ready to make an offer on your new home as soon as you have an accepted offer on your old one.
“Definitely don’t be ready before your time,” agrees Elise, “you should know that there’s enough on the market that you’d want to purchase.”
The best way to go about this is to attend open houses for several weeks and zero in on the properties you really like, while being ready to put your place on the market. Once your apartment has been sold, you’ll be ready to strike and buy your dream home.
Another good move is to buy an apartment in a new development building, since finalizing the purchase generally takes longer for new development.
Option 3: Taking Equity Out
If you’re planning way ahead and you know that you aren’t going to move any earlier than in six months’ time, then you can start thinking about financing now.
“Pull equity out of the value of your current property and use this money for your next down payment in the future,” advises Elise. Since the value of your property should have increased over time, you’ll be able to refinance the mortgage and take some of that money out at your discretion. An experienced mortgage banker will be able to help you with this sort of cash-out refinance.
Option 4: Gifting
If all else fails, don’t be afraid to reach out to family or close relatives for a bridge loan. After all, you’re probably going to sell your place soon, so it’s all going to be fine in the end.
If your seller is asking for a down payment, but your bank is not willing to approve a new mortgage, this might be your only option. Who wants to pass up on their dream apartment, just because their assets are still tied up someplace else? “Ask family or friends to gift you the money. You can always pay them back later,” recommends Elise.
Before you freak out and stop looking for your dream apartment because you’re worried about the finances, let us quote Oscar Wilde: “Everything is going to be fine in the end. If it’s not fine, it’s not the end.”
Elise Leve gave us similar wisdom: “People do it all the time.” With the right experts in your corner and some smart planning, you’ll be in your dream home in no time, without having to break the bank – or rob one!