We created Selling Later to help home sellers find buyers, get into an agreement, and have plenty of time to find a new home. Our concept is based on the two common fears for home sellers and buyers in real estate. First, we want to help you remove the fear of having to carry two mortgages. Second, we want to buy the home of your dreams, not a house that was “the only one available that you kind of liked” when you sold your home and had to buy a new one quickly.
While we hope to erase the two mortgage fear with Selling Later, what if you didn't use our platform (or started the process before we launched) and are currently facing the fear of having to carry two mortgages? What is your best solution when it comes to navigating this problem?
We reached out to our friend Anthony to give us an idea of how you could work through the two mortgage fear.
For a solution, consider refinancing your current mortgage on your current home into an Interest Only Home Equity Line of Credit (HELOC). The interest-only payment reduces the payment drastically and often does not include the escrow of taxes and insurance. You pay your taxes and insurance on your own when they come due. This then helps improve your cash flow and debt ratio qualification on a new mortgage. This is also another way to transfer the equity from your current home to your new home. Let’s look at a hypothetical example for this:
Estimated Home Value: $300,000.00
Estimated Mortgage Balance: $200,000.00
Estimated Total Mortgage Payment with Taxes and Insurance: $2,000.00
Refinance Mortgage into an Interest Only HELOC
80% Financing of the Estimated Home Value: $240,000.00
Subtract $200,000 Mortgage Balance Payoff = $40,000 in equity you could use for a new home purchase.
Payment on an Interest Only HELOC is often tied to the Prime Rate + Margin.
5.25% Prime Rate + 0.50% Margin = 5.75% Variable Rate.
$240,000 X 0.0575 / 365 days in a year X 30 days in a month = $1,134.25 Payment
This example accomplishes two objectives, it helps extract some equity from your current house to use as a down-payment on a new house purchase, and it reduces the monthly debt obligation so you can qualify for a new mortgage payment. Rates and terms vary by the financial institution and often better credit scores lead to better margins in the total interest rate. Some institutions also offer Low Intro Rates, which could help reduce the payment even more. Then when you sell the home, the HELOC is paid in full and closed.
Anthony J. DeLuca
Mortgage Lender & Branch Manager
Victorian Finance LLC
NMLS: 398494 PA Dept of Banking: 34547
Using Selling Later is a way to avoid having the extra costs and pressure of two mortgages. We understand that we aren’t for everyone and want to make sure we are a resource for you, regardless of if you use Selling Later. So, if you are currently stuck in the two mortgage position, we hope this helps give you an idea of how to solve it.
Disclaimer: This is not an ad. Anthony was kind enough to answer these questions for us as a friend because, in all honesty, we are not mortgage experts. We approach our blog as we do with most things: if we don't know an answer, then we need to find an expert and figure it out! Anthony is that expert and is also extremely helpful. If you have further questions, Anthony is more than happy to help answer them for you.