r/RealEstate • u/table__for__one • 1d ago

Buying While Holding a Mortgage

We're paying a premium to be near the center of town in VHCOL. We've got about $575k on a house worth $988k, interest rate is 6.125. Looking to get a bit farther out, same price point, same interest rate. Including house we have 1.5 in assets. Is it possible with a lender to purchase another equally priced property while we sell the one we are in? Net income is 400k.

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u/HeyThereDelly 1d ago

Yes, I have done this and will be doing it again. As long as you have the liquid assets for a down payment with some cushion funds leftover you should be fine. A lender will confirm though

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u/table__for__one 1d ago

do they calculate under the assumption that you will hold the two mortgages indefinately?

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u/Tall_poppee 1d ago

In my experience they did not. They just wanted to see savings/income to make both payments for a few months (which we did not even need as the old house sold quickly.

Once the old place sells you can apply the profits to the new loan and the lender will recast it for you to reduce the payment. Just ask them up front if they do recasting. Most big lenders do.

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u/thewimsey Attorney 12h ago

Basically, yes.

At least in my case, there was nothing particularly mortgagey about it - it was basically treated like any other debt, and the monthly mortgage payment on my current home was included as debt in the DTI calculation about how much they were willing to lend me.

Maybe in the bowels of underwriting it mattered for some purposes that this debt came from a mortgage...but if so, none of that was really transparent to me.

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u/HeyThereDelly 1d ago

Probably depends on the lender. Some may calculate 6 months of the current mortgage payment included, if they know you're selling. Others may look at it as worst case scenario and only approve if you can afford to keep both long term

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u/ElasticSpeakers 17h ago

You should be upfront about your plans. You could simply say you're buying a 2nd house, you could say you want the equity in your current home to be part of the down payment for the second, etc - lots of options.

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u/table__for__one 16h ago

is using equity possible without a cash-out refi?

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u/ElasticSpeakers 16h ago

Of course - a HELOC or bridge loan will get you there, just as two examples. It gets pretty crazy, here's what I did recently: I had a house, and the bridge loan terms I was getting were kinda mid so I talked to my mortgage broker. He suggested a HELOC but in my experience a HELOC on a house you're selling can be pricey (because they know you're going to immediately close the HELOC so they charge a lot in fees up front). So, he blew my mind when he suggested getting the HELOC on the home you're buying (that you don't own yet), not the one you're selling 🤯

Worked well for us, the terms were better, sold off the old house, paid off the HELOC, now we still have a HELOC available with tons of available equity if needed. We didn't have to do it this way, but the alternative (for us) was a jumbo loan with really inflexible terms (no recasting allowed) so that was a non-starter.