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.
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.
What 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
NMLS #1910430 | C2 Financial Corp NMLS #135622
Call me: 720-449-6622
Email me: C@ChrisRayGibson.com
