Mortgage Question

[vetteguy]

We bought our first place about 3 1/2 years ago. It was the first house for either of us (my wife and I), and so we had no other house to sell first, which made it nice because we pretty much got pre-approved for the loan, and picked the place we wanted. Well, now we're looking to get something a little bigger, but I'm a little confused on how this is going to work now.

Basically, my question is, how do you get the 'new' mortgage? Let's say the place I have now I paid $100,000 for, and now I want to buy a house for $150,000. Obviously, I'm going to sell the first house, but when I do, how does that work for the 'new' loan? Does it work like any other loan (like a car) and I can just basically pay off the existing one with the proceeds from the sale, then apply all over again for a new one? Can/do I get an "extension" to my existing for the additional $50,000? And, if I have to apply for a new one, how is the fact that I have an existing loan going to affect that? Assuming I apply before this house is sold, are they going to say "whoa, you have a big loan already...we can't loan you that much more while you still own that house" or do they understand that?

Yes, I am clueless about this, but it's because I've never needed to know anything, and I wanted to have some info before we started talking to realtors and banks.

 

[spidey07]

I'll try to answer, I'm not that knowledgable in this area....options as I understand them.

1) Put offer on new house with contingency that other one must be sold within x period. Otherwise you lose offer on new house. Sellers don't like this as it is a risk to them.
2) Put offer on house and "bridge" the loans, effectively paying both mortgages until your old house is sold.
3) Rent out old house and make money off the renters.
4) Treat both transactions seperately and get loan for new house while still having the one on your old house until it is sold.

 

[Mermaidman]

When you sell your current house, the buyer or the buyer's lender will pay off your lender. You won't see the money--the lenders are too smart to take that risk (Of course, you will get a check for your equity in the house.)

You cannot 'extend' or 'transfer' your mortgage to a new house. It sucks and perhaps there are many good reasons for that, but I suspect it's mainly to enrich the mortgage industry.

If you buy before you sell, you can get a "bridge" loan to tide you over until you do sell.

Ideally, you can arrange to close on your new house right after you sell your current house. (That's why some offers to buy houses have a contingency that the buyers sell their house first.) Good luck!

edit: In response to SPidey's post-
#3) There will be tax issues
#3 and #4) You will have to have lotsa money/income to have mortgage on two houses?

 

[SoulAssassin]

What did your bank say when you called them?

 

[PowerEngineer]

Although the option of making your purchase on another home contingent on the sale of your existing one is something that a seller might not like to see, it's pretty common. And if the market in your area is turning towards a buyer's market, then it'd be my first choice.

If you have the financial wherewithall, it's certainly possible to arrange a bridging loan and/or a completely separate mortgage. This does leave you with two monthly payments to make until your first house sells, and I'd hate the financial uncertainty around that!

 

[richardycc]

noone likes 2 mortgages, until you have money coming out of your wazoo. chances are, the lender of the new mortgage will have a contingency that the first mortgage has to be closed in order to give them the 2nd loan.

 

[DrPizza]

Another possibility: If you can get good rates, take out a home equity on home #1; put that money into home 2, rent home 1.