Can a Current Home Be Used as Downpayment on Another One?

flip_it_fast · #1 02-06-2011, 01:03 AM

I saw this question posted somewhere and I just had to bring it here to NHF. I am so curious to see what you guys think about doing this, if it's even possible.

The question is Can you use your current house (owned outright- no loans) as a down payment on another house?

Here are a couple of answers that people gave...

Quote:

A: You do not need to sell a home in order to buy another; but, the bank will not accept the home you own, free and clear (no loans on it) as a down payment. Banks do not want houses and will not accept houses as a down payment. You could possibly get a line of credit on the home you own outright with no loans, and take out enough money for a down payment on the new house. You will however need to qualify with a lender not only for the loan on the new house, but also for the line of credit (HELOC) on the old house. It would be best for you to check with a reputable lender to see if this is a possibility or not.

A: That is absolutely possible, although you will be limiting your options as to the home you move into in a big way because the seller willing to do that would need to want your home as much as you want theirs. Chances of that? Pretty slim… but possible.
Your best bet would be to sell your home traditionally; once it is under contract, start looking for your new home (until your home is under contract, you won’t know how much money you have to work with in regards to your new home).

Obviously banks do not want to own houses, they want to own money. So unless you find the house of your dreams and the seller happens to like the house you currently own, I don't know how it would work.

Anyone have any thoughts on this?

badmomma · #2 02-06-2011, 11:32 AM

The answers that you put up are what I have heard especially the second one. If you can sell your home and have a contract started for the sale then your set and can start looking for your new home.

I think that if your planning to move you should look into the types of homes your wanting to move into and their cost and then start saving for the down payment.

It will make the whole process alot easier. Banks aren't real good about mortgage loans at the moment so doing as much as you can yourself would be in your best interests all the way around.

realestatehound · #3 02-07-2011, 03:36 AM

I've never heard of anyone trying to use a house as a down payment, but you can use the equity in it to purchase the second home. You can get a construction loan which is for 9 month's and if the house don't sell in that time fram you have to pay the interest and they will extend it another 9 month's. Then when you sell it you can either pay off the new house or put 20% down and get either a 15 or 30 year loan. I use the equity in a home I own to get financing for all my flips and until the fed's stepped in I was getting a loan and the home I purchased stood good for the loan, but thank you fed's for changing the loan laws so I have to use another home now.

badmomma · #4 02-07-2011, 06:25 PM

See thats the problem entirely. The banks went nuts and made bad loans and now everyone is paying the penalty. When my husband and I were looking at a home we were asking about homeowners insurance on it and the answer was no.

The home had to be rented or we had to live in it before we could get it insured. We were very upset as we didn't want to have a home that wasn't insured because then people could get to messing around and get hurt or set it on fire and then what were we going to do. I think this is just one giant mess that is going to get worse before it gets better.

realestatehound · #5 02-08-2011, 03:11 AM

Shelter insures all of my flips and no one is living in them. If they are in your area you might give them a try.

flip_it_fast · #6 02-08-2011, 05:32 PM

An elderly woman who lives in my area experienced the same thing. She and her husband lived up on the hill. Her husband passed away and she just couldn't stay up there anymore so she put her house on the market and bought another one in town. Well the insurance company found out that she moved out of the house on the hill and they dropped her. They told her it's too risky to insure a home that is not lived in.

I am going to mention to her that company you use realestatehound. Maybe they can help her out.