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Best source of 25k needed for settlement

Posted: Wed May 27, 2020 9:10 pm
by Provlima
I plan on purchasing a condo for cash and will have to close on it in about a month.

I plan to sell my current residence after I close on the condo. There is no mortgage on my residence.

I am paying for the condo with cash but will need an additional 25k and am exploring the best way to come up with shortage.

I plan to pay back the 25k loan within a year.

What is the best way to borrow the 25k that will be needed at the condo closing? A small mortgage, a home equity loan, a personal loan, other?

Would greatly appreciate advice on the cheapest way to borrow this 25k shortfall

Thanks for your help

Re: Best source of 25k needed for settlement

Posted: Wed May 27, 2020 9:30 pm
by arcticpineapplecorp.
since you get a home loan, personal loan and home equity loan all from a bank...

have you considered asking your loan officer which option would be the cheapest?

Re: Best source of 25k needed for settlement

Posted: Wed May 27, 2020 9:39 pm
by samsoes
A small mortgage or equity loan/line on the condo (not the current residence) so the interest will be deductible as acquisition debt.

Re: Best source of 25k needed for settlement

Posted: Wed May 27, 2020 9:46 pm
by whodidntante
If you have a large taxable account, you could use a margin loan. A month would allow time to transfer assets to a broker that offers low rates, like IB. Or you could take the loan at the broker you have now, and move the loan and the assets later. A 401k loan might also be an option for you. Family or friends might also be a good way to get that much money. They are required by the IRS to charge you market interest or at least to pay tax as though they did, but they might appreciate a chance to earn a decent rate on their money. You could also borrow against your car, or open a signature credit line if your credit is perfect and your income is high. A credit union is where I would ask about those options.

Re: Best source of 25k needed for settlement

Posted: Wed May 27, 2020 10:37 pm
by 1130Super
Some CC’s have balance transfer checks, could write yourself a check, Better be 110% sure you can thread that needle before intro rate expires. It would end up a lot lower rate annualized if you factor in no closing costs.

Re: Best source of 25k needed for settlement

Posted: Thu May 28, 2020 4:14 am
by bluebolt
The bank who is writing your primary mortgage on the new place will likely have a low/no-cost HELOC offering for just this case. There may be a penalty for closing the HELOC early, but you can pay it down to $0 and keep it open.

Re: Best source of 25k needed for settlement

Posted: Thu May 28, 2020 4:41 am
by neverpanic
How fast will the other home sell? If you're reasonably certain it will sell fast, then f/f may be the way to go. Simple contracts, simple transactions, fast repayment with interest. If you think it'll take some time to sell - who knows what markets will do(?) - then I'd probably do the HELOC. You should be able to get a cheap loan, it's just a matter of how much paperwork you want to do.

Re: Best source of 25k needed for settlement

Posted: Thu May 28, 2020 5:12 am
by whodidntante
1130Super wrote: Wed May 27, 2020 10:37 pm Some CC’s have balance transfer checks, could write yourself a check, Better be 110% sure you can thread that needle before intro rate expires. It would end up a lot lower rate annualized if you factor in no closing costs.
Those have become rare since issuers became concerned about dystopia.

Re: Best source of 25k needed for settlement

Posted: Thu May 28, 2020 5:46 am
by fujiters
A 401k loan may make sense in this situation (relatively small loan amount for short duration) assuming you're unlikely to leave your employer (including being fired) for the duration of the loan. They tend to have very low interest rates (my employer's rate is currently under 1%).

Re: Best source of 25k needed for settlement

Posted: Thu May 28, 2020 6:04 am
by Millennial
fujiters wrote: Thu May 28, 2020 5:46 am A 401k loan may make sense in this situation (relatively small loan amount for short duration) assuming you're unlikely to leave your employer (including being fired) for the duration of the loan. They tend to have very low interest rates (my employer's rate is currently under 1%).
I would typically agree with this, but make sure you consider asset allocation and time out of market. Remember that you will need to sell the underlying assets to take a 401k loan. The equity market has been so volatile... Could be a very costly loan if you miss a chunk of recovery.

Re: Best source of 25k needed for settlement

Posted: Thu May 28, 2020 6:32 am
by fujiters
Millennial wrote: Thu May 28, 2020 6:04 am
fujiters wrote: Thu May 28, 2020 5:46 am A 401k loan may make sense in this situation (relatively small loan amount for short duration) assuming you're unlikely to leave your employer (including being fired) for the duration of the loan. They tend to have very low interest rates (my employer's rate is currently under 1%).
I would typically agree with this, but make sure you consider asset allocation and time out of market. Remember that you will need to sell the underlying assets to take a 401k loan. The equity market has been so volatile... Could be a very costly loan if you miss a chunk of recovery.
Yes, you'd probably want to sell fixed income to maintain your asset allocation. If you don't have fixed income in your 401k, you can sell it wherever you hold it and buy the same amount of stock there. If you hold no fixed income, you'll either have to sell stock anyway, or opt to go over 100% stock by talking out a loan some other way.