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Any Ideas
Chris, it sounds like one of those 'beauty is in the eye of the beholder' situations.
You say that your place is 'worth' $800,000 and that you have $250,000 in mortgage against it, meaning you have $550,000 'worth' of your money in the house. But, I assume you bought it for much less than $800k. That being the case, the $550k. of your 'money' that is in that house is not cash, it is only equity, if the real estate market were to go down, so would the $550k. of equity.
The way I see it, you have two main choices;
1) Discount the capital gains you have made on that house to get it sold NOW, as long as you sell it for more than you paid, you are still 'up' on the deal, just not by as much as you MIGHT have been.
2) Go to your banker, if you have $550k. in equity the will probably "Bridge Finance" the other property for you. The way this works is your bank gives you the money to buy the other place, adds a second mortgage to your existing place but just charges you interest-only payments till it sells, the interest on it will probably be about the same as the rent you would get from renting one of them out till a sale happens, some banks will also let the interest just accumulate, and you make on payments at all, the balance just gets bigger until you sell and pay it off.
Choice 2 is better for you if you think you can sell for close to you price, it will just take a little while. The deciding factor is purely economics, the interest ($375k. will cost about $20k. a year) over the time involved, versus the discount to sell. For example, if it took two years to sell, it would be $40k. in interest, if you had to discount to sell now but had to reduce by more than $40k. then you would be better off to leave the house mepty & for sale for 2 years. If you rented the new house out and used the rent to offset the payments on the increased mortgage, it would cost you almost nothing in the end, especially if you sell for close to your target price.
Sorry for the length folks, economics can be tough to explain succinctly.
Best of luck.
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