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Financing Options When Buying and Selling at the Same Time
Concurrent transaction financing options: (1) HELOC on current home: draw equity as down payment; lower cost than bridge (prime + 0.5-1.5% vs prime + 1.5-2.5%). (2) Bridge loan: $15K-$30K for 6 months on $400K bridge amount. (3) 80/10/10 piggyback: 80% first mortgage + 10% second + 10% cash; avoids PMI. DTI with two properties: both payments included unless current home is under contract. Get current home under contract before applying for new mortgage to remove it from DTI. Own Luxury Homes® 12-Point Agent Integrity Audit™.
Financing Options When Buying and Selling at the Same Time
Financing a new home purchase while still owning your current home involves specific strategies to fund the down payment and manage the DTI calculation. Here are the options from lowest to highest cost.
Using a HELOC as a Bridge
A Home Equity Line of Credit (HELOC) on your current home is often the lowest-cost way to access equity for a down payment on the new home. How it works: before listing your current home, open a HELOC against its equity. The HELOC gives you a line of credit you can draw upon. When you find the new home, draw from the HELOC for the down payment. When your current home sells, use the proceeds to pay off the HELOC draw. Cost advantage: HELOC rates are typically prime + 0.5–1.5% — significantly lower than bridge loan rates (prime + 1.5–2.5%). On a $100,000 draw for 90 days: HELOC interest approximately $2,000–3,000; bridge equivalent approximately $3,500–5,000. Challenge: many HELOCs require the property to not be listed for sale when the line is opened. If you already have your home listed, the HELOC lender may freeze or cancel the line. The strategy: open the HELOC before listing, while still in the planning phase. Additional consideration: the HELOC payment adds to your monthly obligations. Lenders qualifying you for the new mortgage will include the HELOC payment in your DTI.
DTI With Two Properties: How Lenders Calculate It
When you own your current home and are purchasing a new one, the lender calculating your DTI for the new mortgage must account for both mortgage obligations: Default rule (both properties in DTI): both the current mortgage payment AND the new mortgage payment are included in the DTI calculation. This can push many buyers above qualification thresholds. Exception: signed purchase contract on current home. If your current home is under contract to sell, most conventional lenders allow you to exclude the current mortgage from the DTI calculation (or reduce it to a nominal amount). You must provide the executed purchase contract and evidence of adequate equity to cover the payoff. Exception: lease on current home. If you are renting out your current home rather than selling it, 75% of the rental income may be counted as income (offsetting the mortgage payment) depending on the lender and loan program. This is why the sequence matters: getting your current home under contract before applying for the new mortgage can dramatically improve your qualifying power for the purchase.
The 80/10/10 Piggyback Option
An 80/10/10 (piggyback) loan allows buyers with limited cash to avoid PMI on the first mortgage: • 80% first mortgage (conventional; avoids PMI at 80% LTV) • 10% second mortgage (home equity loan or HELOC) • 10% cash down payment In a concurrent transaction where equity from the sale will arrive after the purchase closes, the 10% second mortgage can be paid off immediately from sale proceeds, leaving the buyer with an 80% first mortgage at favorable conventional terms. Cost comparison: PMI on a 10% down payment is typically $50–$200+/month. A 10% second mortgage at current rates costs more initially but is paid off at the sale. The break-even depends on how quickly the sale proceeds arrive.
“The financing conversation for concurrent transactions is one of the most complex I have with clients, because the right option depends on the specific numbers: how much equity is in the current home, what the new purchase price is, what the client's income and reserves look like, and how long they expect to carry both properties. There is no universal right answer. I always recommend that concurrent buyers speak with at least two lenders who have specific experience with these transactions before committing to a financing strategy.”
— Ryan Brown, Principal Broker & CEO, Own Luxury Homes®
How do I buy a house when I already have a mortgage?
Options: (1) HELOC on your current home (draw equity for the down payment before listing; lowest cost but requires property not yet listed when HELOC is opened); (2) bridge loan (short-term financing against equity; more flexible but higher cost: prime + 1.5-2.5%); (3) qualify for two mortgages simultaneously (requires income sufficient for both DTI; easier if current home is under contract, as lenders can exclude that payment from DTI); (4) sell current home first and use proceeds for new down payment with temporary housing in between.
Can you qualify for two mortgages at the same time?
Yes, if your income supports both DTI calculations. The key: if your current home is under contract with a signed purchase agreement and sufficient equity to cover the payoff, most conventional lenders will exclude the current mortgage from the DTI calculation when qualifying you for the new purchase. Without a purchase contract, both mortgage payments are included in DTI, which requires significantly higher income to qualify. This is why listing and getting your current home under contract before applying for the new mortgage purchase loan is strategically important in concurrent transactions.
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— Ryan Brown, Principal Broker & CEO, Own Luxury Homes® (FL License BK3626873)