How to Buy a New House Without Selling Your Old One

Do you want to buy a new house, but you don’t want to sell your old one first? Maybe you want to keep your old house as an investment property, or you don’t want to deal with the hassle of moving twice. Or maybe you just love your old house too much to let it go.

Whatever your reason, buying a new house without selling your old one is possible, but it can be tricky. You need to have enough money for the down payment, closing costs, and two mortgages. You also need to qualify for a new loan while carrying the debt of your old one. And you need to be prepared for the risks and costs of owning two homes at the same time.

But don’t worry, we’re here to help. In this blog post, we’ll show you three possible ways to buy a new house without selling your old one, along with some real-life user experiences and best practices. Let’s get started!

1. Use the equity in your current home

One way to buy a new house without selling your old one is to use the equity in your current home. Equity is the difference between the market value of your home and the amount you owe on your mortgage. For example, if your home is worth $300,000 and you owe $200,000, you have $100,000 in equity.

You can use your equity to finance the purchase of your new home in two ways:

Home equity loan: A home equity loan is a second mortgage that allows you to borrow a lump sum of money based on your equity. You can use the money for any purpose, including buying a new home. You’ll have to pay interest and fees on the loan, and you’ll have to repay it in monthly installments over a fixed term, usually 10 to 15 years.

Home equity line of credit (HELOC): A HELOC is a revolving line of credit that allows you to borrow money as you need it, up to a certain limit, based on your equity. You can use the money for any purpose, including buying a new home. You’ll only pay interest on the amount you use, and you’ll have to repay it in monthly installments over a variable term, usually 10 to 20 years.

Using the equity in your current home can be a good option if you have a lot of equity, a low interest rate, and a good credit score.?

However, it also comes with some drawbacks, such as:

You’ll have to pay closing costs and fees on the loan or line of credit, which can range from 2% to 5% of the amount you borrow.

You’ll increase your debt and monthly payments, which can affect your cash flow and your ability to qualify for a new loan.

You’ll put your current home at risk, as you’ll have to use it as collateral for the loan or line of credit. If you fail to repay, you could lose your home to foreclosure.

Personal experience

Lisa and Tom wanted to buy a bigger home for their growing family, but they didn’t want to sell their old home, which they had bought at a bargain price during the housing crash. They had a lot of equity in their old home, so they decided to use a HELOC to finance the down payment and closing costs of their new home. They found a lender who offered them a HELOC with a low interest rate and no fees. They used the HELOC to buy their new home and moved in. They then rented out their old home and used the rental income to pay off the HELOC and the mortgage. They were happy with their decision, as they were able to buy their dream home without selling their old one, and they also created a passive income stream from their old home.

Best practices

Shop around and compare different lenders and loan options to find the best deal for your situation.

Make sure you can afford the monthly payments on both your old and new mortgages, as well as the loan or line of credit.

Have a contingency plan in case your rental income is not enough to cover your expenses or your old home is vacant for a long period of time.

Keep track of your loan balance and interest rate, and pay off the loan or line of credit as soon as possible to save money and reduce your debt.

2. Use a 401(k) loan

Another way to buy a new house without selling your old one is to use a 401(k) loan. A 401(k) loan is a loan that you take out from your retirement account. You can use the money for any purpose, including buying a new home. You’ll have to pay interest on the loan, but the interest goes back to your account, not to a lender. You’ll also have to repay the loan in monthly installments over a fixed term, usually five years.

Using a 401(k) loan can be a good option if you have a lot of money in your retirement account, a low interest rate, and a stable income.?

However, it also comes with some drawbacks, such as:

You’ll reduce your retirement savings and miss out on potential growth and compounding.

You’ll have to pay taxes and penalties on the loan amount if you leave your job or fail to repay the loan on time.

You’ll limit your contribution to your retirement account while you have the loan, as you can only contribute up to the annual limit minus the loan amount.

Personal experience

Kevin and Amy wanted to buy a new home, but they didn’t have enough money for the down payment and closing costs. They also didn’t want to sell their old home, which they had inherited from their parents. They had a lot of money in their 401(k) accounts, so they decided to use a 401(k) loan to finance the purchase of their new home. They each took out a loan of $50,000 from their respective accounts, for a total of $100,000. They used the money to buy their new home and moved in. They then rented out their old home and used the rental income to pay off the 401(k) loans and the mortgage. They were satisfied with their decision, as they were able to buy their new home without selling their old one, and they also preserved their family home.

Best practices

Check with your plan administrator and your tax advisor to understand the rules and implications of taking out a 401(k) loan.

Borrow only the amount you need and can afford to repay, and avoid taking out multiple loans from different accounts.

Repay the loan as soon as possible to restore your retirement savings and avoid taxes and penalties.

Continue to contribute to your retirement account as much as you can while you have the loan, and increase your contribution after you pay off the loan.

3. Use a cash-out refinance

A third way to buy a new house without selling your old one is to use a cash-out refinance. A cash-out refinance is a type of mortgage refinancing that allows you to replace your existing mortgage with a new one that is larger than the amount you owe. You can use the difference between the new and old loans for any purpose, including buying a new home. You’ll have to pay interest and fees on the new loan, and you’ll have to repay it in monthly installments over a new term, usually 15 to 30 years.

Using a cash-out refinance can be a good option if you have a lot of equity in your current home, a low interest rate, and a good credit score. However, it also comes with some drawbacks, such as:

You’ll have to pay closing costs and fees on the new loan, which can range from 2% to 6% of the loan amount.

You’ll increase your debt and monthly payments, which can affect your cash flow and your ability to qualify for a new loan.

You’ll extend your repayment period, which can increase the total interest you pay over the life of the loan.

Personal experience

John and Mary wanted to buy a new home, but they didn’t want to sell their old home, which they had bought at a low interest rate and had paid off more than half of the principal. They had a lot of equity in their old home, so they decided to use a cash-out refinance to finance the purchase of their new home. They refinanced their old mortgage with a new one that was $100,000 larger than the amount they owed. They used the extra $100,000 to buy their new home and moved in. They then rented out their old home and used the rental income to pay off the new mortgage. They were pleased with their decision, as they were able to buy their new home without selling their old one, and they also maintained their low interest rate.

Best practices

Shop around and compare different lenders and loan options to find the best deal for your situation.

Make sure you can afford the monthly payments on both your old and new mortgages, as well as the new loan.

Have a contingency plan in case your rental income is not enough to cover your expenses or your old home is vacant for a long period of time.

Keep track of your loan balance and interest rate, and pay off the new loan as soon as possible to save money and reduce your debt.

Conclusion

Buying a new house without selling your old one can be a smart and convenient way to upgrade your living situation, keep your old home as an investment, or avoid the hassle of moving twice. However, it can also be a risky and costly endeavor that requires a lot of financial planning and discipline. You need to weigh the pros and cons carefully and explore your options before making a decision. In this blog post, we showed you three possible ways to buy a new house without selling your old one, along with some real