When purchasing or selling property in Savannah, you might find yourself carrying two mortgages simultaneously. It can be challenging and expensive to be on the hook for TWO mortgages, whether you did it out of choice or because your original home hasn’t sold.
Read below to learn about some ways you can lessen the burden!
Plan Ahead As Much As You Can
Savings are a must in as many ways as possible. When taking on two mortgages, you should save up a reserve of at least three to six months. Aside from your down payment, closing costs, and other fees associated with purchasing a new home, this is in addition to the mortgage reserve. When moving and purchasing real estate, there are a lot of unexpected costs, and the thought of juggling two mortgages at the same time shouldn’t be underestimated.
Bridge Loans, 401k Advances & HELOC
You have a few options to finance your real estate goals, but don’t rush into any of them before running all of the numbers. Consult with a trusted advisor before borrowing additional funds to float two mortgages.
- Bridge Loans: A bridge loan will, in essence, bridge the gap between the sale price of a new home, and your new mortgage. Typically, you do not have to begin making payments right away. This might make sense in some situations, but you can expect much higher interest rates than with a typical mortgage. In addition, you can expect lots of fees and costs: Administrative, escrow, title, notary, recording, appraisal, wirings fees, etc.
- 401k Advance: Taking out an advance on your 401k should always be done with caution. In some cases, you will be able to take out a loan against the 401k, which means you will be paying yourself back instead of a bank. Taking out an advance will incur severe tax penalties in addition to early withdrawal fees from your 401k administrator.
- HELOC: Or a home equity line of credit. This works similarly to a bridge loan, but at a lower rate. If you have equity in your home, you might be able to secure a line of credit against it. This means you will be able to borrow as needed, up to a certain amount. You can also look into a standard home equity loan, which will provide you funds in one lump sum.
You Can Rent the Old House
If you use the old house for short-term or vacation rentals while it is being listed for sale, you might be able to save money on repairs. In the meantime, try to find a small, cost-effective rental that you can use short term. Depending on the situation, it might even make sense to stay with family while you fix up the second home.
It Might Be Worth Reconsidering
We aren’t saying it can’t be done, but you may need to be flexible if it doesn’t make sense financially. You might be able to save a lot of money by selling your home first and then renting for a short time. If you are considering two mortgages, make sure it is really worth it before you commit!