PSA to my clients who are feeling stuck in their house with their incredibly low interest rate but want to move…. Follow these 6 steps on how to make that happen in an incredibly smart way!
1. Keep the House: Even if you feel stuck with your current low interest rate and want to move, there is an opportunity to make a move and also utilize your existing property as an investment opportunity. This means that you can explore options where you can benefit from your current property while moving forward.
2. Take Out A Home Equity Loan To Use For A Down Payment IF Needed: If you already have a downpayment saved up of about 5%, then you can skip this step! If you don't, then consider this! Take out a home equity loan on your current property and use that money as a down payment on the new home. A home equity loan is different than an adjustable rate HELOC!
3. Buy A New House With Your Home Equity Loan or Saved Downpayment: Once you've taken out a home equity loan or saved a downpayment, you can use that money to buy a new house. This can help you get the home of your dreams without having to sell your current property! TAKE ADVANTAGE of the slowed down market. You can take your time shopping to make sure you get what you want AND we can negotiate in interest-rate-buy-down-concessions in order to get your new monthly payment as low as possible. It is a GREAT time to buy.
4. Rent out the first property: Once you move out, rent out your first property. Because you have such a low interest rate on that 1st house and rent rates are stable, you will surely cash flow! You can then use the rental income to make the monthly payment on the new property more manageable. This can help you bridge the financial gap and ensure that the monthly expenses associated with the new property remain affordable. In short, you'll have a rental property where you are using your cash flow to offset the mortgage on the new house!
5. When rates drop, refinance your new home: It's important to keep an eye on interest rates. When rates drop, you have the opportunity to refinance your new home. This can result in a lower interest rate and ultimately lead to a lower monthly payment. Now you will have an affordable monthly payment on your new home AND a cash flowing rental property!
6. Decide on the next steps: After going through the previous steps, it's important to decide what you want to do next. With the extra monthly cash flow generated from the first property you can choose to keep that extra cash flow for your own enjoyment. Alternatively, you can also consider selling the first property. Since you will have refinanced, that means that rates would be lower at that time, which also usually means it's likely a great time to sell and get top dollar!
By following these steps and considering these options, you can make the most out of your real estate investments and still move forward to the home of your dreams! Have more questions or want to talk more about your home? Reach out! Let's chat!
Photo Credit: Kaytlyn Victoria Perez