How to Build a House Before Selling Yours - Increasing Equity

Written by Posted On Wednesday, 14 November 2018 12:22

You have just found a brilliant blueprint of the ideal new home you have always desired to build for your family. However, you still have your current home. This begs the question, “Is there a way on how to build a house before selling yours?”

How to Build a House Before Selling Yours

In essence, you perhaps can’t even afford the burden of carrying two mortgages. Or perhaps you were anticipating for some funds from your sale to assist you clear the down payments among other costs. So what to do?

 

Before you can let your dream of building a house slip right through your hands, here are a few strategies that home building experts Carmel Homes Design Group recommend can turn your dilemma into a dream come true:

Tap Into the Equity Of Your Current Home

If your credit scores are high and you have considerable equity in your home, you can free up the equity courtesy of a home equity credit line. The use of a HELOC as it is popularly known as, is a fantastic way you can use the home equity of your current home before you ultimately sell your house.

 

HELOCs allow you to utilize about 85% of the value of your home, although less your mortgage balance. Moreover, it is fine-tuned depending on your income and credit profile. Many of these HELOCs come with variable interest rates, and as such, it is crucial that you clear the loan soon after selling your house.

Borrow Against Your 401K Account

401K loans are a great way to help you build your home before you can sell yours. If your plans administrator affirms that your plan allows it, assess the interest rate, repayment period, as well as other relevant terms that apply. Moreover, your plan will also dictate how much you can borrow.

Get a Gift

Numerous lenders will usually accept gifts from family members to serve as part of a house down payment. For non-conforming or jumbo loans, the gift cannot cover the whole down payment although some lenders only need for the purchaser to give out 5% from their funds.

 

Obtaining a gift to assist you in covering the down payment comes with several conditions among them that your donor completes a gift letter and also avails several other financial details like bank statement copies. It is also essential that you take into account that gifts are not loans and as such are not refundable.

Go for Cash-Out Refinancing

Cash-out refinances are quite similar to HELOCs since you are utilizing the equity in your current home and subsequently turning into cash. Nonetheless, contrary to HELOCs, refinance first clears your existing mortgage and allows you to start a new one. Refinancing allows you to take a percentage of the equity (about 80%) and then your bank grants you the amount in cash but subsequently adds this amount to your new, refinanced, and of course larger mortgage.

Conclusion

Buying a home before selling your old one is a massive endeavor. Lucky for you though, there are several useful and effective options as outlined above that can propel your dream into a success. If you wondering about how to build a house before selling yours, use any of these few strategies and turn your dream into a reality.

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Rocky Degrenia

Small business owner; all types of flooring. #1 Rated Flooring Installer in Phoenix, AZ. Over 6 decades of experience and education. Residential and Commercial. Family man, father of three teenage girls.

www.knightflooringaz.com/

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