How To Carry Two Mortgages While You Are Fixing Up Your Dream Home in Knoxville.

When buying and selling real estate, you might find yourself having to carry two mortgages at once in Knoxville. Whether this is by choice or because your original home hasn’t sold, having to be on the hook for TWO mortgages can be an expensive feat.

There are some things you can do to lessen the burden, read below to learn more!

Plan Ahead as Much As Possible

To prepare for the financial responsibility of two mortgages, it’s essential to save as much as you can beforehand. Aim to build a reserve fund of at least 3-6 months’ worth of expenses, in addition to your down payment, closing costs, and other fees associated with purchasing a new home. Moving and buying real estate often come with unexpected expenses, so thorough planning is necessary.  Below are a few ways for you to plan and prepare for this transition in your life.  If at the end of this you realize you want to move forward with the project but don’t feel you can cover the two notes then we would be glad to help and pay cash for your house.

Bridge Loans, 401k Advances & HELOC

If you need more cash to fund your real estate ambitions, you have a few options, but don’t rush into any of these without running all of the numbers. Speak with a trusted advisor before borrowing additional funds to float two mortgages.

  • Bridge Loans: A bridge loan will, in essence, bridge the gap between the sale price of a new home, and your new mortgage. Typically, you do not have to begin making payments right away. This might make sense in some situations, but you can expect much higher interest rates than with a typical mortgage. In addition, you can expect lots of fees and costs: Administrative, escrow, title, notary, recording, appraisal, wirings fees, etc.
  • 401k Advance: Taking out an advance on your 401k should always be done with caution. In some cases, you will be able to take out a loan against the 401k, which means you will be paying yourself back instead of a bank. Taking out an advance will incur severe tax penalties in addition to early withdrawal fees from your 401k administrator.
  • HELOC: Or a home equity line of credit. This works similarly to a bridge loan, but at a lower rate. If you have equity in your home, you might be able to secure a line of credit against it. This means you will be able to borrow as needed, up to a certain amount. You can also look into a standard home equity loan, which will provide you funds in one lump sum.

Rent the Old Home

It might sound a bit silly, and like additional work when you are fixing up another house, but you might be able to save money if you use the old house as a short term or vacation rental while you are waiting for it to sell.  This could be a wonderful way to make a little income to subsidies the expenses.

Our you could evaluate whether carrying two mortgages is financially feasible for you. An alternative approach is selling your current home first and temporarily staying in a short-term rental. This can significantly reduce financial strain. Before committing to floating two mortgages, carefully calculate the costs and benefits to make an informed decision.

In the meantime, find yourself a small, cost effective rental that you can use on a short term basis. In the right situation, it might even make sense to stay with family while you are fixing up the second home.  Staying with family can be tough but sometimes the sacrifice makes since.

You Could Reconsider

Carrying two mortgages when buying and selling real estate in Knoxville requires careful financial planning and consideration. By saving ahead, exploring financing options, renting out your old home, or rethinking your approach, you can effectively manage the financial burden. Remember to consult with professionals in the field, such as financial advisors, real estate experts, or mortgage lenders, who can provide personalized guidance based on your unique circumstances. With the right strategies in place, you can navigate the process smoothly and achieve your real estate goals in Knoxville.

If you are interested in purchasing a fixer-upper, or any home in the Knoxville, Tn area, shoot us an email here or give our team a call! 865-909-2525

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