Homeowners today feel stuck due to low mortgage rates but are living in homes that no longer suit their lifestyles. With the current economic and real estate landscapes, many are hesitant to move, fearing the loss of their low rates and, for some, facing high-interest debts. However, there are ways to navigate this situation effectively and successfully upgrade or downsize to a home that meets your modern needs (whether you have non-mortgage debt or not).
Understanding the Current Economic and Real Estate Landscape
The key challenge today is homeowners’ reluctance to give up low mortgage rates obtained during the pandemic. This hesitancy has led to one of the lowest sales volumes since the 1990’s. However, clinging to these rates might be holding you back more than you realize. As life events like family expansions or relocations occur, your current home may no longer be the best fit.
Case Study Analysis
The economic landscape, marked by inflation and increasing household debt, adds another layer of complexity. It’s important to consider one’s total financial picture, not just the mortgage rate. In this video breakdown of a real-world case study of a homeowner named Jane, you can see how consolidating debt and moving to a new home can actually result in financial savings and long-term benefits. By leveraging home equity to transition to a home that suits your lifestyle, you may also be able to wipe out debt and pay off your mortgage faster.
Home Transition Strategies: Overview, Pros, and Cons
Whether or not you have debt to manage, managing a home transition is challenging. There is a lot of planning and logistics that go into a home transition and there are five different options you want to consider:
1. Home Sale Contingency
– What it is: This strategy involves making an offer on a new home that is contingent upon selling your current home. It’s a common approach when homeowners are not financially prepared to own two homes simultaneously.
– Pros: Provides clarity on financial outcomes and limits the risk of owning two properties at once.
– Cons: Can be less appealing to sellers in a competitive market; also limits negotiation leverage and may prolong the buying process.
2. Double Move
– What it is: Involves selling your current home and moving into temporary housing before purchasing a new home. This strategy removes the dependency of your home sale from the buying process.
– Pros: Eliminates the need for a sale contingency, potentially making offers on new homes more attractive.
– Cons: Requires two moves, which can be costly and disruptive; also demands finding and financing interim housing.
3. Leaseback Agreement
– What it is: After selling your home, you rent it back from the new owner for a limited period, allowing you more time to find a new home.
– Pros: Provides temporary housing without the need to immediately relocate, offering a smoother transition.
– Cons: May restrict the pool of potential buyers for your current home and adds time pressure to find a new home quickly.
4. Bridge Loans
– What it is: This financial tool allows you to tap into the equity of your current home to finance the purchase of a new one before selling the existing property.
– Pros: Facilitates the purchase of a new home without waiting to sell your current one, removing sale contingencies.
– Cons: Requires qualifying for additional financing; there’s a risk of temporary financial strain if the current home doesn’t sell quickly.
5. Retaining and Renting
– What it is: Instead of selling, you keep your current home as a rental property while purchasing a new residence.
– Pros: Turns your current home into an investment, potentially generating rental income and contributing to long-term wealth.
– Cons: Comes with the responsibilities and potential challenges of being a landlord; may affect mortgage qualifications for the new home.
The following video breaks down each strategy in detail:
If you feel stuck in your current home, remember that there are viable options to help you transition to a home that better suits your current lifestyle. It’s all about finding the right strategy that aligns with your personal and financial goals. Don’t hesitate to reach out for personalized advice and explore the best path forward for you and your family.
Need help navigating the best option for you? Please reach out to Jess and Lauryn to book a strategy call:
Lauryn Dempsey: [email protected] / (720) 802-9274
Jess Uphoff: [email protected] / (720) 225-2720