Heloc for downpayment?

[Anonymous]

We were thinking of selling our current home in the spring and upgrading to a larger home (with a bigger mortgage). However, we happened to randomly find a home we're seriously interested in purchasing - we were planning to use the equity in our current home for a downpayment, but since we found a home to buy first, our lender mentioned we could possibly do a HELOC for the downpayment.

Has anyone gone this route? We would need to take out enough to put 10% down. As soon as we sell our current home in the spring, we would be able to pay off the HELOC. Our current house is in Cap Hill, sweet spot in terms of price range (estimated ~850k-ish selling price without looking at comps), and *good* school district (zoned for Maury).

I suppose alternatively we could throw our house on the market ASAP, but we would prefer to wait for the spring market ideally. We have a few things to fix here and there, wanted to add a fresh coat of paint, etc. Or is it better just to try to sell ASAP? We don't know if we will actually get the house we're interested in, but it's not in as competitive a price range or condition.

[Anonymous]

No matter what - get a HELOC for the down payment. If it is now - or 6 months from now it is an investment that will provide you flexibility.

For selling your home - I think closing on new property. Getting it painted, floors done, any other projects before moving in is a great strategy.

Move into new place and have flexibility to get current property ready for the market. It will show better decluttered.

[Anonymous]

Can you carry both places? Housing market is dramatically slowing so you may have trouble selling in spring.

[Anonymous]

Wait, you don’t have any cash for down payment??

[Anonymous]

Anonymous wrote:Can you carry both places? Housing market is dramatically slowing so you may have trouble selling in spring.

We could, but wouldn't want to obv.

Our cash is tied up in other investments, as we didn't think we'd find something we would want so soon. We'd prefer not to cash those investments out just to float us for a few months, given we have a lot of equity in our current home.

[Anonymous]

You will have to have the income to qualify for the new mortgage while still carrying any debt on the current home. Can you do that? If not, your question is moot.

[Anonymous]

Either a HELOC or a bridge loan. We did the bridge (designed for the purpose of floating you in between purchase/selling), amd paid it right back after selling. I would go with whichever has a lower interest rate. Our bridge loan ended up being 3 months, and worth it. Check with your local credit union (or big bank, but their rates are usually higher) and ask them the bridge loan rates.

[Anonymous]

We used our HELOC to purchase our new house, but had been renting it for a year so we used that income to qualify for the second property. We couldn’t have qualified without the rental income.

[Anonymous]

Run the scenario by your mortgage broker. You want to make sure that you can get underwriting done properly while carrying two mortgages plus the HELOC.

[Anonymous]

Anonymous wrote:Run the scenario by your mortgage broker. You want to make sure that you can get underwriting done properly while carrying two mortgages plus the HELOC.

The mortgage broker is actually the one that recommended the heloc.

For the person that recommended bridge loan, which credit union did you go to?

[Anonymous]

First Savings had good bridge loan options available for us when we did something similar this year, you might check with them.

[Anonymous]

Anonymous wrote:First Savings had good bridge loan options available for us when we did something similar this year, you might check with them.

Great, thanks, PP!