To buy a house is a wonderful dream come true for any person. But, to buy one more with a second mortgage, is impossible, right?
This blog will deal with the questions of how to buy another house despite having one already and what are its mortgage implications?
To buy another house is no big deal, especially in today’s time.
As everyone wants to have more assets compared to liabilities and it’s the reason why people consider their ‘home’ more of a property and look for further investments.
SCENARIO #1 – BUYING a NEW house by SELLING the OLD!
Moreover, it also depends on the situation whether you are looking to buy a new house by selling your older one.
In this scenario, you need to convince your lender that you have either listed your property or it’s already been listed.
However, you will need to assure the lender concerning whether you have sold your house, you have pending offers, or you will sell it prior when moving into a new one.
It will take some time, maybe a couple of days for the lender to validate your words and confirm the aforementioned situation.
SCENARIO #2 – How to Qualify for a Second Mortgage over a Residential Rental Property?
One of the most common scenarios is where you consider producing some quick bucks from your residential property by converting it into a residential rental property.
Now, you may ask, if I decide to work around things in this scenario, am I qualified for a mortgage?
Of course, you will be qualified for a mortgage.
“YOU WANT TO BUY A NEW HOUSE”, you can directly say this to your lender and further add that you are looking to rent this mortgage out and you also have a future lease along with someone ready to rent the property.
The lender after looking at your situation will qualify you for a mortgage by considering your rents to offset the current obligation of the mortgage.
From scenario #1 and scenario #2, you must have comprehended that you don’t have to sell your house and then buy a new one, or you can do the same. But, I would further advise you to consult finance specialists or professionals like the bank, lender, or a real estate agent.
You may still have your reservations over a second mortgage but you need to consider it as a value enhancer that will aid towards a prosperous financial opportunity.
Now, let’s move on to the second question which is what will happen to your current mortgage from the current house?
- WHAT is Portability in Mortgages?
Well, there is something known as ‘portability’ in mortgages which gets ported or transferred from one mortgage to another mortgage’s property, once the former is sold.
- Advantages of Portability
The advantage of portability comes into play when the rates get high. In this case, you can access your previous rates, if they are comparatively lower than the current one. You have the option to port that mortgage once you sell your house to the new one by keeping your earlier rates intact.
Another advantage of portability is when you are on a fixed rate and you try to sell your house it could save you from the unnecessary burden of penalties also known as the exit or payout penalties.
The onus is on you regarding presenting this portability option to either your lender, bank, or any professional and asking them concerning your transfer of a mortgage from one property to another.
Then, hear out what they have to say regarding the same.
Once you have carefully grasped the conceptual idea of portability you may ask about is it necessary to take another stress or pre-qualification test?
Definitely, yes.
Let’s assume you are qualified for a mortgage for the very first time, but it doesn’t make you a first-time homebuyer.
Anytime you are involved with a mortgage you have to deal with lending and when it comes to mortgages or secured lending, it’s a prerequisite to have a stress test conducted by the lender or professional.
Due to recent changes, everyone in today’s time is subjected to this test to evaluate their qualification irrespective if the person is a first-time home buyer or a 10th-time home-buyer, to have an even playing field in the realm of mortgages this sort of stress test seems fair.
SCENARIO #3 – Getting a HOUSE as a GIFT!
Interestingly, I remember one of my dear friends once asked me what if I inherit a home, but I already have a mortgage, would I still have to re-qualify if I want to take that mortgage on?
Well, this sort of situation may seem complex and tumultuous, but at the same time, it’s interesting.
In inheritance, or case of a gift, and so on, scenarios like these get different. You need to be careful and seek advice at every step, as these are nothing but exceptional scenarios.
In this, you may have to take stress or you could easily avoid it, but you require supervision of either the lender or professionals who could walk you through all the possible scenarios and their outcomes.
SCENARIO #4 – Idea of 2 Mortgages: GOOD or BAD?
Moving on, to another scenario where you are using your second property, or let’s say your current property and you’re going to move into the second property which is also your investment property.
So, you may question me now, is it a good idea to carry two mortgages?
I consider that it all depends on your financial situation and your financial application.
If you are willing to turn one of your properties into a rental or investment property, you will have to keep certain pros and cons of real estate in your mind.
As you first need to check out, whether your rental property would meet your financial obligation or not.
And, for it, you are obliged to meet your financial planner who could give you proper advice and make out whether things in this domain are making sense or not and what the significant risks involved in having rental property are.
The risks may weigh more than you could imagine in the form of if someone damages your property or your renters haven’t paid the rent yet, you would still be under current obligation to pay the concerned mortgage payment.
SUMMING UP!
While dealing in property or mortgages you need to explore every option and also keep an open mind regarding your future investments.
As things in the world of finance are complex and overwhelming.
However, having financial acumen when it comes to real estate investments could be your key to making some quick bucks but you also need to be cautious towards your mortgages, especially second mortgages.
And, for our side, it’s advisable to always have a second opinion, especially of the people who have made their living out of it.
Also, you need to keep one more thing in mind: every investment or mortgage scenario is going to be different from the previous one, as it’s a dynamic thing all you need to do is be brave and open to communication with your lender and financial professionals.