Hi all,
I'm looking for some advice / insight / tales of experience.
We are currently trying to sell our small home to buy a larger home in the same town. Since we bought we've had 3 children and we've just outgrown it. Our home is on the market now, and our area is definitely a buyer's market. We have about 50% equity in our home, so plenty of room to play around with the listing price and still make a good chunk of equity.
I know, generally, advice is to sell before buying. But I'll lay out my case for wanting to go ahead and buy now: We've got 3 small children and keeping our home show-ready is almost impossible. I love the idea of emptying the house now. And the bigger concern is that we have no clue where we would live in the interim between selling and buying. There is only one set of apartments in town that does short term rentals, and the cost on them is 2500/month - this may not sound like much to those of you in HCOL areas, but for us, 2 or 3 months at that rental price would literally put us into an entirely different home-buying bracket. That's about 4 times our mortgage payment (on a 15-year loan!). That would eat our down payment in a hurry.
We've found a house that we love. We're familiar with the market in our area, and this is not the kind of home that comes up often. It's at the very bottom of our price range, and (you guys will like this) it's an energy advantage home, which is almost impossible to find in our area full of spec-house-neighborhoods. We've looked at a lot, but this is the house we keep coming back to. I don't think we'll find the space we need and location we like for close to this price. This home would allow us to get a 15 or 20 year term instead of 30.
We've been pre-approved for a loan on top of our existing mortgage. The only missing detail would be our down payment. From what I read, bridge loans have their own set of closing costs for the "bridge" as well as the following purchase loan, and have higher interest rates. Not interested in that. I suggested to my husband that instead, we consider borrowing from his 401k to make the down payment. From what I can tell, the cost would be about $50 to administer the loan, and then whatever we would have earned (or potentially lost) on the investment for the duration of the loan. We'd be able to make both mortgage payments from our budget (though we'd likely also decrease his retirement contribution from 11% to 6% during the double-mortgage period to help ease that cost). We have a 6-month emergency fund that we would not touch. My husband's job is very stable. (I am a SAH/Homeschool mom)
Once our current house sells, we'd take the proceeds and pay off the 401k loan and put the remainder straight to the new mortgage.
My husband is understandably a bit nervous about this. Two mortgages is kind of scary for any duration, even if we can budget for it. I feel like we're prepared to sell our house quickly even if we must drop the price - but of course, nobody can guarantee there will be a buyer at any price. I'm curious if I'm missing out on any aspects or if anyone else has done this.