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Buy before you sell, equity unlock program

January 27, 2024

Buy before you sell, equity unlock program

 

Why is it so hard to buy a home before selling your current home? 

 

If you currently own a home, you often need to sell it prior to buying a new one because either you need some of the equity for a down payment or your income can not qualify for 2 mortgages at the same time.

Upgrade your home, buy before you sell, equity unlock

How the equity unlock program solves these challenges.

  • This program will give you equity from your current home for a downpayment on a new purchase.
  • It will also remove your current home payment from your debt-to-income calculation for your new mortgage qualification. 

Other benefits of the equity unlock program.

  • You can use some of the equity in your current home to also fix up your current home and potentially achieve a much higher sales price. 
  • Write offers on a replacement home that is not contingent on the sale of your current home, making you a more attractive buyer.
  • It may be difficult to show your current home for sale while you are living there because of kids, pets, or too many personal belongings.
  • No interest on the funds distributed.

Upgrade your home, buy before you sell, equity unlockWhat are the cons of the buy before you sell, equity unlock program?

  • The max equity unlocked is 80% of the current value of your home, potentially limiting you to a smaller down payment, and lower purchase price than you would otherwise qualify for. 
  • The cost of this program is 2.4% of the value of your current home. 
  • You still have to pay the mortgage on your current home even though the payment is removed from your DTI qualifications.
  • There will be pressure to sell your current home quickly, because of time constraints and the 2 payments. 

How does the math work to calculate how much equity will be unlocked?

Take the value of your current home, multiply it by .8, subtract 2.4% of the value of the current home, subtract your current home loan balance, and finally subtract hypothetical real estate transaction costs of 6% of the value of the home. The remainder is what will be available for a down payment on a home purchase or combination of home repairs. See the sample calculation below. 

 

Buy Before You Sell Hypothetical

 
   

Estimated Value of Current Home

  $678,600

80% of estimated value

  $542,880

less Cost of program 2.4%

  $16,286

less Current Loan

  $373,500

less Hypothetical Closing Costs

  $40,716

Equity Unlocked

  $112,378

 

 

Christopher Gibson

Christopher Gibson

NMLS #1910430 | C2 Financial Corp NMLS #135622

Call me: 720-449-6622

Email me: C@ChrisRayGibson.com

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Christopher Gibson
Explore the intricacies of the mortgage market with our latest insights at Reverse Mortgages & Home Loans with Christopher Gibson at C2 Financial. This comprehensive blog dives into up-to-date real estate market statistics, offering a clear picture of current trends and forecasts. Gain an in-depth understanding of reverse mortgages, demystifying this option for homeowners. Additionally, the blog provides detailed information on traditional conforming loans, including government-backed options like FHA, VA, and USDA loans, explaining their benefits and application processes. This is an essential read for anyone looking to navigate the complexities of home loans and real estate investments.
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Explore the intricacies of the mortgage market with our latest insights at Reverse Mortgages & Home Loans with Christopher Gibson at C2 Financial. This comprehensive blog dives into up-to-date real es...
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