Bridging the Time Between Buying a New Home and Selling Yours

Many clients I work with face a similar problem: they are afraid to sell their current home before they find a new home to buy. These days, with limited inventory, selling a house is generally easier and faster than finding one to buy. For many, the sale of their current home is the source of funds for a down payment and closing costs for their new home.

Use a Mortgage Recast for the Time Between Buying Homes

One option that has worked for many of my clients dealing with this situation is a mortgage recast. Mortgage recasting is a form of prepaying your mortgage. To recast your loan, you simply make a lump sum payment toward the balance. Your lender will then re-amortize the loan with the smaller balance and new lower monthly payments. Your interest rate and loan term will not change. There is usually a nominal processing/administrative fee of $150 to $250, and most conventional loans will allow a one-time recast.

Down Payments

However, you would buy the new home with a smaller down payment and a larger mortgage than you will eventually want. Once you sell your current home, you can make a lump sum principal reduction on your new mortgage and have it recast, ending up with the payment you would have had if you had sold your current home first. If you want to learn more about mortgage recasting, please contact me.