Planning ahead: Best way to buy $1M New Home?

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Cruise
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Planning ahead: Best way to buy $1M New Home?

Post by Cruise » Thu Jul 12, 2018 1:17 am

Thanking you in advance for helping out in this thought exercise. I am trying to get a handle on the best way of financing the purchasing a new property.

The situation is that we own our current home outright, and according to Zillow, it is worth $995K. We love our home and environment, but feel that we should make a change due to future aging-in-place concerns. We have been in our current residence for close to 30 years, so our home purchasing/financing skills are rusty.

Any new residence will have to knock our socks off for us to want to move. Because of our selectivity, we don't want to put our current residence up for sale until we have first locked in our next home. After all, it might take us months or years to find someplace that we really like.

We project that our new home will cost between $1.0M-$1.5M. Some options we have considered based upon our rusty knowledge:

1. Jumbo/Bridge Loan. We do not have a bundle of cash to plunk down and purchase the home outright, but we could handle a 20% downpayment if we did a jumbo loan. We would pay off the loan as soon as we could sell our existing house.

2. Cash Purchase We could liquidate enough equity holdings to purchase a home outright, but that would create a really massive capital gains hit. I'd really rather not touch our accounts until we really need them for long-term care, or we gift them to charity.

I should also mention that I want to have the home purchased by our Trust.

So the question for those versed in real estate finance, what are the real options that exist for us, and what is the best course of action?

Thank you for your assistance and counsel.

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HomerJ
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Re: Planning ahead: Best way to buy $1M New Home?

Post by HomerJ » Thu Jul 12, 2018 1:24 am

Best way to buy $1M New Home?
First, get a million dollars.
The J stands for Jay

JoeRetire
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Re: Planning ahead: Best way to buy $1M New Home?

Post by JoeRetire » Thu Jul 12, 2018 6:27 am

I believe the best way to purchase any home with the current rates is to pay 20% down and get a 30-year fixed rate mortgage.

TigerNest
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Re: Planning ahead: Best way to buy $1M New Home?

Post by TigerNest » Thu Jul 12, 2018 7:29 am

Option #1 seems prudent, and is likely the best path forward unless you're in an area with very tight supply and being able to pay in cash gives you an important edge in bidding (i.e. SF Bay area).

smitcat
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Re: Planning ahead: Best way to buy $1M New Home?

Post by smitcat » Thu Jul 12, 2018 7:37 am

We have used a bridge loan twice in our lifetimes.
It is very unerving evben when you 'think' you have the time frames and each transaction 'locked up' with no liklelihood of changes.

I would lay it out on paper to see the potential results and costs of the bridge loan geting extended while at the same time carrying two homes expenses. Months or years worth of costs as well as the potential market drying up is not a comfortable feeling IMHO.
FWIW - While I did this when I was younger I doubt I would do it at this point in life.

NotWhoYouThink
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Re: Planning ahead: Best way to buy $1M New Home?

Post by NotWhoYouThink » Thu Jul 12, 2018 8:51 am

Say Zillow is optimistic, and your net selling your old home (after realtor fees and other selling costs) is $900K. And since houses always cost more than you expect, say your new house is at the top end at $1.5M.

Where does the extra $600K come from? Are you willing to take on a mortgage, or would you sell off investments to pay off the new one once the old home sells?

If you want to mortgage the amount over $900K, then you could get 2 loans for the new house - a bridge or balloon loan for the $900K, and a regular 15 or 30 year mortgage for the rest.

If you want to pay cash for the new house once your old house sells you could cash out investments for the difference between the new home price and expected proceeds from your current home, get a bridge loan, and then pay it off when your current home sells.

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Pajamas
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Re: Planning ahead: Best way to buy $1M New Home?

Post by Pajamas » Thu Jul 12, 2018 9:02 am

Cruise wrote:
Thu Jul 12, 2018 1:17 am
We love our home and environment, but feel that we should make a change due to future aging-in-place concerns. We have been in our current residence for close to 30 years, so our home purchasing/financing skills are rusty.

Any new residence will have to knock our socks off for us to want to move. Because of our selectivity, we don't want to put our current residence up for sale until we have first locked in our next home. After all, it might take us months or years to find someplace that we really like.
What exactly are your specific aging-in-place concerns?

Is moving really the best solution?

Sounds like you don't particularly want to move and might be better off staying where you are and addressing your concerns differently.

mickroark
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Re: Planning ahead: Best way to buy $1M New Home?

Post by mickroark » Thu Jul 12, 2018 9:26 am

Wait till the next market crash like 2008. Then buy a bank repo. That's what I did, and got a 400,000 house for 120,000. :sharebeer

Cruise
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Re: Planning ahead: Best way to buy $1M New Home?

Post by Cruise » Thu Jul 12, 2018 9:37 pm

Thank you for your insightful suggestions. I appreciate them.

I thought I would share another suggestion I received today from a trusted counsel: Apply for a Home Equity Line of Credit, unused until it is time to pull the trigger and purchase a home. The specific suggestion was to do this in advance, so the loan amount is immediately available. An additional suggestion was to procure it through a private banking resource, which while potentially more expensive, would open up a ready avenue to facilitate a conventional or bridge load over and above the HELOC. I am going to follow up on this suggestion and talk to a PB contact.

To PJ: You are correct in your observation that perhaps we are not wanting to move. We could reconfigure our current residence for aging in place, but there are some neighbor issues that while not currently major, could get problematic in the future. In fact, one of the potential solutions is to position ourselves to buy our neighbor's home should the neighbor decide to move. A HELOC would certainly help with that.

kjvmartin
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Re: Planning ahead: Best way to buy $1M New Home?

Post by kjvmartin » Thu Jul 12, 2018 9:47 pm

mickroark wrote:
Thu Jul 12, 2018 9:26 am
Wait till the next market crash like 2008. Then buy a bank repo. That's what I did, and got a 400,000 house for 120,000. :sharebeer
How long till that happens?

delamer
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Re: Planning ahead: Best way to buy $1M New Home?

Post by delamer » Thu Jul 12, 2018 9:56 pm

To ask the fairly obvious — do you have enough income to qualify for a million dollar loan or HELOC?

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