Q: How do I choose between renting or buying?
A: Owning a home offers tax benefits, as well as the freedom to make decisions about where you live. Homeowners, unlike renters, can secure a fixed-rate loan and lock in their monthly payments, so they can make investment plans knowing their expenses won’t change substantially. Renters are at the whim of their landlord, who can raise the rent each year without a renter’s input. Homeowners, on the other hand, are in control of their property and decide whether they allow pets, decorating, or permanent improvements.
Q: Should I buy first, or sell first?
A: The answer to this question lies squarely with you. Do you need the equity that’s built up in your present home to complete the purchase of a new home? If so, you either need to sell first or consider a bridge loan or house sale contingency. If not, you may choose to buy first and sell later. Before making a final decision, give me a call to discuss this question. We will touch on every aspect of what it may mean for your particular situation.
It’s a good time to trade up to a home that suits your circumstances better than the one you have now. Before interest rates go up any more, you will be able to afford a larger mortgage, and your present home will be affordable to a larger group of people.
If you want to buy before selling, you have to decide how to do it before your home equity is available to you. That could be tricky. Here are some ways to do it:
* Some home builders offer plans that allow up to 100 percent of the purchase price to be financed by a qualified buyer. If you take this route, financial advisors suggest taking a short-term adjustable rate mortgage (ARM) with an eye toward refinancing when you receive the proceeds of your home sale.
* You could take a second mortgage on your home to cover the down payment.
* In some cases, you can take a first mortgage on the new home and second mortgage to be paid off when you sell the one you have now. Any second mortgage should be a low-rate ARM.
In all cases, it’s important to be realistic about the amount of cash your home will generate. It’s better to plan on the low side of what the proceeds may be than to be overly optimistic about the amount of money the sale will bring.