Author Topic: $$ from sold rental property - pay off mortgage or save for next house?  (Read 328 times)

TheBeeKeeper

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got lots of cash from selling a rental, and we're looking into buying a new primary residence in the next year or so.
with the cash we have now I can make a cash offer on a new house (before selling our current home), which will have great advantage because it's a heavy sellers market and houses are gone within hours of listing.
Currently the cash is sitting in a high-yield savings account making just below 1%.
Was thinking of paying off the 100K$ we have left o our current home mortgage (4.25%) and if and when we find a new house either take a bridge loan or take $$ out of our HELOC if that is allowed in such cases.

WWYD? 


srad

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Re: $$ from sold rental property - pay off mortgage or save for next house?
« Reply #1 on: October 02, 2020, 01:23:53 PM »
I had a similar problem as you recently. 

Last year i sold my primary residence, and I still have a bunch of cash sitting in a crappy savings account waiting for the next right deal to come around.  Since there was more than enough money in there for another deal, I decided to take some of it and pay off my lowest balance rental, which was around 90k.  And FYI - I'm loving the increased cashflow.

I know the dpoym crew will have something to the contrary to say. 

Telecaster

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Re: $$ from sold rental property - pay off mortgage or save for next house?
« Reply #2 on: October 02, 2020, 02:40:17 PM »
got lots of cash from selling a rental, and we're looking into buying a new primary residence in the next year or so.
with the cash we have now I can make a cash offer on a new house (before selling our current home), which will have great advantage because it's a heavy sellers market and houses are gone within hours of listing.
Currently the cash is sitting in a high-yield savings account making just below 1%.
Was thinking of paying off the 100K$ we have left o our current home mortgage (4.25%) and if and when we find a new house either take a bridge loan or take $$ out of our HELOC if that is allowed in such cases.

WWYD?

Cutting out the bank vastly simplifies the buying process.    If you really think it will only be about a year I'd just keep it in cash and cut out all the karate.   And as you say, buyers love cash offers because there is no bank to screw up the process. 

sailinlight

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Re: $$ from sold rental property - pay off mortgage or save for next house?
« Reply #3 on: October 02, 2020, 02:52:38 PM »
It is much easier to buy a house with cash and you may get a better price, but just keep in mind doing a cash-our refi later is sometimes difficult and costs more than a purchase loan. Unless you plan to stay in the pay off your mortgage club.

TheBeeKeeper

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Re: $$ from sold rental property - pay off mortgage or save for next house?
« Reply #4 on: October 02, 2020, 07:31:02 PM »
It is much easier to buy a house with cash and you may get a better price, but just keep in mind doing a cash-our refi later is sometimes difficult and costs more than a purchase loan. Unless you plan to stay in the pay off your mortgage club.

yup, planning to be mortgage free after buying the next house :-)

fishnfool

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Re: $$ from sold rental property - pay off mortgage or save for next house?
« Reply #5 on: October 02, 2020, 08:01:57 PM »
Im also in same postion after selling our primary home and moved into our rental. It was always our plan to move into the rental/retirement home.

We are 5 years into the last refi, 4% 30 year loan. I decided to hold off on paying off our new primary, former rental. We are doing a refi, 20 year 2.875% and putting $50k towards it.

My plan is to put the remainder into a money mkt here that right now is giving 1.25%. Possibly investing in another property if and when the housing mkt cools down, or drops?

Time will tell. Its nice to have options.

Good luck!

SndcxxJ

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Re: $$ from sold rental property - pay off mortgage or save for next house?
« Reply #6 on: October 02, 2020, 08:59:35 PM »
I lean towards don't pay off the mortgage club, especially if paying off your current mortgage slips you out of being an all cash buyer on the next property.
Think of it this way, between your savings account income (1%) and your mortgage expense (4.25%) on a $100k loan, we are talking about a net expense of $3,250.00 or so.
In my market, to obtain a loan we often pay 1 point and $3,000 in expenses.  A bridge loan will be fairly high interest (and closing costs), and a HELOC will be up there a bit too.
Plus, you MIGHT squeeze out a better purchase price with your all cash offer.
Overall, having the options of that cash handy seems better to me since your current mortgage is low interest.

TheBeeKeeper

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Re: $$ from sold rental property - pay off mortgage or save for next house?
« Reply #7 on: October 03, 2020, 06:55:07 AM »
Thanks everyone!


we decided to keep the mortgage and have the option to make a full cash offer :-)