The good fortune to have the financial side of things easily fall into place when transitioning homes is not a luxury many people have, and here’s why: In a perfect world, you could have both your old and new houses close at the same time, but of course when buying a new home, things rarely happen that way nowadays. You have several options available to make the transition as smooth as possible, but it depends on whether your old home sells first, or you make the purchase of your new home first.
If Your Old Home Sells First
This can be very frightening for a lot of sellers, for the simple fact that for the time being, you’re homeless. The silver lining to this happening first is that you have the funds to purchase your new home. It may take time for your new home to close and for you to move in, so you have some options in the interim, such as temporarily renting your old home back from the new homeowners, provided you pay for all the costs (new mortgage, property taxes, homeowners insurance, etc). Another option to consider is to stay with friends or family temporarily as long as they know you’re buying a new home.
If You Purchase Your New Home First
The downside to this option is that you’re essentially doubling your costs until your old home sells, but if you manage to qualify for both mortgages, the extra costs may be something you can afford temporarily. If you feel you might struggle with the costs when buying a new home, there are things you can do in this situation as well. Borrowing against your home equity (a HELOC loan) to use as the down payment for a new home is an option, but if you decide to do this, acquiring the loan before you put your house on the market is a must; almost no banks will give you a line of credit if they know your goal is to sell your home. You might also consider tapping into your 401k plan, assuming you can pay back the loan timely.