Building a new home before selling your old one?

[VacationDad]

Can you build a new home while still living in your current home? What if you need the equity from the sale of your current home to put down for the financing of your new home? Do people have to sell their current home and rent a place temporarily while their new home is built? That would be a real pain. Has anyone gone through this process?

 

[HaleyB]

Builder finance. If you build with a big company they will work it out for you.

If you are talking about a custom build on your own lot kinda thing, I think some people take out HELC to pay for the building costs. There are loan programs for this situation too. Where they give you a short term building loan and then when the house is done it converts or you pay it off and get a regular loan.

You can also sell your home but do a lease back. My parents are in the middle of doing this, building a new home before they sell the one they have now...

 

[aka-mad4themouse]

We did it about 11 years ago.

We did need to have a down payment for the new home when we signed the agreement. And we needed to qualify for a mortgage for the amount over and above what we intended to realize from the sale of the first home.

Our new house was actually ready on the day that it was promised, which is very unusual for builders to do. But we were dealing with a small developer and not a big, mega-builder like Pulte or Toll Brothers. Fortunately, we were able to find a buyer for the old home who was able to make settlement on the same day. Otherwise, we would have needed a bridge loan in the amount that the mortgage did not cover.

If the new home is not ready when the old one goes to settlement, you can offer to "rent" your old home from the buyer until such time that the new one is available. If that's not a possibility, then you may very well end up in a short-term rental home or apartment.

 

[LoriKay]

We've done it twice. Both times our contractor had the construction loan. Neither of these were a volume builder. I feel like we've been very lucky to have everything work out well both times. We were able to sell the existing homes and work out the closing dates both times so that we could move from the old houses into the new ones. One time we did have to have a bridge loan as the closing on the old house was a week after closing on the new house but it worked out ok.

 

[java]

In our situation we built in a development. We needed to put down a minimal deposit ( minimal being under $10,000) and we needed to pay 10% of the lot premium up front. Then the rest was not due until closing. So we lived in our home during the process- then sold it and closed on it 1 week before we closed on the new home.(we were moving out of state so the movers took a day just to get there) So we did need the money from the sale of our home but we did not need it until we closed on the home. so it was checks back and forth ... And it all worked out very smoothly for us. We did stay in a hotel for a week in our old neighborhood so my son could finish school that year. It just was what we needed to do. I think we could have done the transaction the same day if that is what we needed to do.
But if you are building on your own piece of land and dealing with a private contractor all bets are off. They want money all along and you need a building loan.

 

[utahkennedys]

We are building a custom home now. We were lucky to sell our old home in 6 weeks, so we are in a rental. But, to get the process started, we needed $15k down in cash, which we used from savings. I think different builders require different amounts. I have to say, if I had it to do over, I would rather stay in my current house while I built, b/c living in a rental for 8 months during the build has been a real pain...but we don't have the fear of ever having 2 mortgages either, which is a position (a bad one) our friends are in now...

 

[CarolA]

I did this a few years ago with a new subdivison. I put down something like $5,000?? Signed the contract in July, put my house on the market in Sept, closed on it in December and closed on the new house in January. (I wound up at the Homestead suites for a month....)

It might be harder with a custom home where you have to get a construction loan, but if you have a builder doing that part of the financing it's not that bad.

 

[princessjv]

A few years ago we built a new home. We put our existing home on the market the spring before it was due to be completed, hoping that we would not have to do a double move (rental-to-new home). We were lucky enough to sell our house fast and arrange a closing date 1 month after the new home was to be complete. Unfortuneatly the new house was late by 2 month, so we had to move in with a neighbor for 1 month. What a bummer!

My suggestion, with the way the housing market has cooled down, would be to sell your existing house, move to a rental and build. Although it may be a pain, you will be happy to not have to worry about 2 morgages.