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Hello everyone, I need to move to another location. Can I take a home equity line of credit on my existing house to pay for the down payment of a new home, and then sell the first house that I used for the line of credit? Are there any restrictions to do that? Can I avoid the fee that I will get if I sell the first house early? Thanks.
I agree with the first answer. You will have to disclose the source of the funds on the purchase of the new home so that they can calculate the debt ratio correctly.
I would add that it will be difficult to get a home equity loan if the home is listed for sale. Get the home equity loan first if at all possible.
Otherwise what you are looking for is a bridge loan. Some lenders offer them only if they have the purchase loan on your new home so take care to make all of the arrangements in advance so that you don’t end up in a jam.
You also need to consider whether or not you will be able to get the home sold quickly for what you owe on it or be able to carry both houses while your current home is on the market. Without having your current home sold, you will have to qualify with all the payments in your debt ratio and you have no idea how many people have bought a home thinking there current home would sell only to go broke trying to carry two payments and then let the one on the market go to foreclosure.
Good luck with the move and be careful. There are worse things than renting for a while where you are going.
You can use the funds from your line for anything really. make sure the lender on the new house doesn’t have a problem with it. The new loan may inflate your debt to income ratio and disqualify you for the new mortgage. If there is a prepayment penalty on the line and you sell within that period, you will owe the prepay fee.
why not sell the first house and then use the left over money as a downpayment? Then you will know how much money you have for a downpayment as well as not get stuck paying 2 mortgage.
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Make sure you get a HELOC with NO prepayment penalty. When you sell you 1st home, any and all loans secured by it (including HELOC) will need to be satisfied (fully paid off) during the closing. So when you sell the home make sure you can cover loans on it, real estate broker, title insurance, property taxes through closing if due later, etc.
Will you be able to cover monthly payments for both homes until the 1st one sells? As mentioned, a “bridge” is typically used when buying a home while selling another.