If your house if going to be sold for less than what you bought it, can you put the difference on a new house?

Question

My mom wants to sell our house, and move elsewhere, but it would be sold for less than what she bought it for initially. If our house is going to be sold for, say, 140,000, can she buy a new house, say for, 130,000, and put the remaining 10,000 on the new house?

Answer 1

I think you are asking can she do a substitution of collateral - take the 10,000 she is going to owe on the old house and roll it into the mortgage for the new one - so the new house mortgage would be purchase price + 10,000.

I don't think you can do this with a house (sometimes you can when trading an old car for a new one) but I don't think you can do it in real estate. However, she would have to talk to her current lender and see if it is something they do.

Traditionally, when your mom sells her home - she will go to closing: she will get the sales price - Realtor fees - current mortgage = amount she gets if equity. If she has negative equity (or is upside down- owes more than it is worth) she will have take money to closing and pay the negative equity.

Here's another option:
Now, if the new house is valued at 150,000 and she purchases it for 140,000 - she will be able to borrow 150,000 on it ( maybe a mortgage of 140,000 with a home equity line of credit for 10,000.) If she can work the timing out - then she can use the 10,000 home equity line of credit toward the negative equity on the old house at that closing.

Your mom really needs to talk to a Realtor and mortgage specialist that she trusts. Over recent years, mortgage companies got crazy in their lending - coming up with crazy mortgage programs. Since mortgages are confusing, many homeowners when into mortgages not really knowing what they had -

for example,: if you took out an interest only mortgage - you only had to pay the interest on the loan each - sounds good right?- so people could borrow more than they could afford to pay. When these guys went to sell the home - they owed more than the home was worth b/c by paying the interest only they never reduced the amount of the loan and the interest accrued so the balance owed actually went up - not down- causing the loan to be more than the house was worth.

If your mom got caught in something like that - she needs to talk to her lender. As interest rates go up and folks default on their mortgage (foreclose) the mortgage companies are trying to work with the homeowners to find a way to keep them in the house.

Answer 2

I am assuming you mean the remaining balance on the new mortgage. You may be able to. Only a loan officer would be able to tell you for sure. You would need to make sure the New home appraises for the extra $10,000. Also, you would need coinciding settlements! Could happen!

Answer 3

depends...if theres no note on the old house, then all the sale is hers to dispose of...if there is the note has to be paid off and the balance is hers to dispose of. If there is no balance, or shes "upside down" (owing more than she can get,) then shes not in a good situation.

Answer 4

No. If your house sells for less than what you paid for it, you are simply out the difference. There is no $10k to put on another house!

Answer 5

what???
she's making a loss on house #1 -- how could she "apply it" to the new one? whatever she gets on the old house has to pay off the old house, unless she incorporates the loss into her new mortgage on the new one -- in other words, even though the new house costs less, she'll pay more to the bank to cover for the old one.

Answer 6

Will you be my accountant??? LMAO