Buying new house,Sell\Rent current home? (Seattle)

5 Replies

I am trying to buy new house in Seattle about 1M ,and have current home that has around $200k loan left, monthly I pay around $2500 mortgage (2.5% interest rate, 10 years left on 15 years loan). Options: 1) Sell the current home around $680K , take $480K extra cash and add as down payment in new house so less debt and save interest on less loan for 30 years term. 2) rent the current home with break even of monthly mortgage and rent in an assumption that prices will keep rising and keep it and pay off the loan in next 10 years. What you pro suggest? Renting a property definitely comes with some overhead of unknowns but has pros/cons in above options so looking for suggestions.

The interest rate on your existing loan is very attractive but earning nothing on roughly $480k would not be acceptable to me. If I were in this position, I would be looking to sell the home and take $250k (single) or $500k (married) capital gain tax free and roll it into some other income producing asset.

Depending on your current situation you may want the stability of paying down extra on your primary mortgage. However, that’s really a choice you will need to make based on your preferences / level of risk tolerance.

Since there is no standard correct answer, try to just focus on what you think will be best for you and your family. :)

$480 K in equity should be earning you a return of 10% equilivant to about 4K per month in income.

Does that help you any in deciding whether you should hold on to a property which in reality has major negative cash flow.

Faith investors would need the property to appreciate by greater than 50K per year to hold for appreciation alone.

  

Sachin

if you don't sell present home ...will you have ample down payment funds for new  home ?  will you be able to  qualify for the new home  carrying the rental property ( fyi - you can offset the current mtg payment  with rental income if you can get a lease  agreement in place on home you will be moving from )

if you can qualify for new home without needing to sell present home  and   if you are OK with  managing a rental property ….then this idea is  a fine  one ….downside is you will a lot of  equity not really  working for you

If you are not already  pre approved with a lender and  if actively looking to  buy a home - get  pre approval in place  asap in order to  know for certain that you can  qualify for  both scenarios ...

Thank you John, Thomas and Dave for the reply, and to answer Dave question , I am pre-qualified for loan without selling the home. So it is my choice I keep it as renting property or sell to take the equity and invest. Initially I thought to convert my loan to 30 years on current $200K and that will reduce my monthly mortgage and save on rent ($1K/month saving) , but I am thinking now to take the equity and either invest in new home to reduce my debt and interest or invest somewhere else.

Sachin - I would agree with the decision ……..its  good to know that you are  pre approved  so that  you can  buy  if you find a place   without  having the  present home  affecting  your ability to close on a new place