How much cash should I keep on hand if I'm trading up to a bigger house in the next year

[Anonymous]

I'm thinking of trading up to a more costly house in the next year. We will probably find the house that we want and then sell our house as soon as possible. I have about 600K equity in my current house, which can take care of a down payment in the new house. Also, I have a HELOC that could bridge the down payment on the new home before we sell our current home. I'm looking to buy a house that is around 1.3 million. How much cash should I keep aside for this transaction? Thanks!

[Anonymous]

I have no idea what you're asking. Are you trying to figure out the transaction costs for a $1.3M house purchase? How much of an emergency fund you should need to include upkeep on a larger house?

[Anonymous]

OP here. Thanks for your reply! I'm wondering if any transaction costs won't easily be paid with equity from my current house. I guess if I need to pay 2 mortgages for a period of time until my old house sells, cash will be necessary.

[Anonymous]

You'll have to sell your current house first, in order to get access to the $600K. (Also, the seller assumes realtor fees of 6%, so don't forget to subtract that from your equity.)

You'll need cash on had for the down payment (20%), earnest deposit (can be high, depending on how competitive the market is), closing costs. Also, factor in moving costs, rental fees (if you need to live somewhere else for a couple of months before moving into the new house), and funds for minor repairs and renovations (assuming that the house is essentially move-in ready). You'll need to furnish the house, too, since I assume that the new house will be bigger.

[Anonymous]

Check the terms of your HELOC. You may not be able to use it to bridge the down payment. We just went through this and the bridge was a real problem. We ended up using a margin loan against our investments, and are hoping our old home sells quickly.