Thread: Selling and moving up..?

From a purely cashflow basis, option 3 is the only one where you aren't in the red. Options 1 and 2 will end up costing you money.

It's possible that the market may continue to decline, and your current home will decline [further] in value. However, in terms of dollars and also percent of value, a larger and more expensive house will fare worse if the market continues to decline.

It's hard to believe that you have outgrown your current home in only 2-1/2 years - did you just buy something too small?

Anyway, I would choose option 3, with a few additions:

1. If your mortgage is with a local bank, it may still be held by them. Often they will let you do a loan adjustment (sometimes called an "endorsement") which is much cheaper than a refinance, but has the same net effect.

2. Save the difference between your current payment and the payment you would be making on your $260K house and use it as part of your down payment on your new home when you finally move, or use it to pay down your current mortgage balance (you'll be making a 6.375% return on your money).

Good luck.

My family consisted of only myself and my wife when we bought the house, now shortly we will have 1 more child in addition to the 1 yr old we have so; that and buying a smaller house then we should have.

Our mortgage is originated by Freddie Mac and serviced by USBank. We tried to refinance 6 months back and it ended up no where due to a ultra conservative appraisal and it cost us 1k... for nothing. I definitely see the argument where our current home will be affected less than the target home if the market declines. The next house is our '10yr' house so we'd be betting on an eventual return. The real argument that comes to mind very often is if we get stuck in a home due to the economy, will we be happy and can we make it work for our growing family.

thanks SearchTheJungle for your input.

You might not be able to get a loan without selling your present house. Too many people got a loan on another house and walked away from the first house/mortgage.

You need to talk to a lender about the refi and the possibility of getting another loan before you can make any decision.

Greg, I agree.. I have an appointment this next week with a financial Residential Loan Specialist and plan on going over the numbers.

Regarding renting;
We don't have a much cash in our back pocket, truthfully only about 10k in direct savings and that's our emergency money. I feel really weary owning two houses and landlord liability... what do you suggest is safe regarding funds "just in case" in a rental situation? Another huge factor is whether or not we can refinance the current home loan from 6.375 to something like 5%.

Regarding our option to sell our house now;
If we sold the house and had to deal with negative equity - say 15k, what loan vehicles can we use other than personal unsecured loan? Could we tie it in to the next house loan? Say if a house is offered at 250k and we negotiate 235k, can we roll the negative equity balance into that 97% loan?

Following option 1 and dealing with negative equity on closing; what are my options for loan vehicles for that amount (let's say 20k). Worse case i get a unsecured personal loan, but those rates are through the roof (10%+). Does anyone have any other suggestions? Thanks,

I don't know how badly you want or need to move, but with low rates and a soft market, moving up in a down market can make a lot of sense, provided you can sell your home without have to bringing $ to the table. I am not pushing any of the options, but here's a thought if you indeed decide that you would like to pursue option 1: Since you have a 12K shortage as a major obstacle, see if your listing agent will reduce the commission on the sell and perhaps they can make it up in the buy. When you purchase your next home, your agent can structure the deal to where the seller pays them a bonus, and in essence, they recoup their lost commission. Or, maybe your agent will cut you a break and reduce/cut his or her commission on the listing end knowing they will get compensated on the buy. This will greatly cut into the amount you would be short. Then, you can hopefully save enough over the next 4-6 months, which may be how long it takes to sell, depending on your market, to make up the rest of the shortage. As a disclaimer, I have heard of agents using this tactic, although we have not. However, this could certainly be a way to lower the amount of money you may be short, and at least make option 1 a more viable option. If you were eligible for the new move up buyer tax credit of $6500, this would add additional money to your cause, but I believe you must have lived in the home for 5 years in order to qualify. Whatever you do, we wish you the best.

Thanks Dan, that's the kind of advice I've been looking for. My agent has agreed drop their commission by 1% if they are my agent for my next buy as well, so my closing cost would be ~7 and 1/2%.

I'm glad your agent come to the table with a creative way to help you achieve your goals. Good luck.

Glad to hear your agent was willing to work with you! I know one of your concerns is having enough emergency cash on hand after paying off the short sale balance. You might want to try asking the bank if they would be willing to take a note back for the amount of the difference since it is so small. (Most banks are taking a huge hit on short sales right now!) They might let you sign a promissory note for the difference without actually having this be a true short sale. It might not work, but it would be worth a call to your lender to find out.