I have a property with $200,000 equity and currently have around $100,000 debt and want to buy another property worth $275,000. This property is selling below fair market value by atleast $20,000.
I want to payoff the debt using my equity and needs to close this second deal as soon as possible.
My plan A right now is to refinance my existing home and pull out atleast $180,000 from the equity and use that to payoff the debt (and be debt free) and also put down 25% downpayment on the new house.
Does this sound like a good plan? Thanks a lot for your advice. This site is just awesome!!!
My plan A right now is to refinance my existing home and pull out atleast $180,000 from the equity and use that to payoff the debt (and be debt free) and also put down 25% downpayment on the new house.
Unfortunately, borrowing (pulling out) $180,000 to pay $100,000 of debt will not make you debt free. In fact, by my math, that puts you $80,000 MORE in debt than before the refi.
I also question the wisdom of buying a $275,000 property with only $20,000 equity.
Good Luck,
Mike
Another thing is to look at the cost of refi oppose to a HELOC. HELOCs can have low rates and little to no cost.
If you do not have a 2nd on your current mortgage or maybe if you have a high 2nd, you may want to look at e HELOC.
Also what are you planning on doing with the 2nd home you buy? Is it an investment property?? Will it cashflow?? remember you will have expenses on that home…
Unless the existing debt is a high interest rate, I’d probably leave it in place and do a heloc.
$20,000 off on a property worth $275.000 isn’t even 10% off. So it isn’t really much of a bargain ( There are properties that are a bargain if you can get 10% off, but those aren’t all that common)
Unless your local market is still going up fast, I suggest that you start with a lot lower offer on that property, if you decide to buy it. 10% should be $27,500 off fair market value, and you’d want to get at least that much off the price.
I know that $20,000 is a lot of money, but if prices are dropping, you’ll quickly find that you have paid full market price as prices go down all around you.
In a hot market with prices going up fast, sometimes 10% off is the best you can do. But you ought to be able to get a better bargain than that in this market. Sellers are scared about whether or not they can sell, so they should be willing to look at low offers, and afraid to turn them down, if the offer is even close to reasonable.