Bridge or HELOC Loan? - Posted by Bob

Posted by John Corey on March 22, 2006 at 06:07:38:


The two plans are not that far apart. For some people like myself I would decide based on the hassle and certainty rather than the slight differences in financing costs.

You are allowed to sell and not pay taxes on X gains (250K or 500K depending on single or a married couple) once every 5 years. You have to have lived in the home 2 out of 5 years unless there was a 1031 into the home you are calling your residence. Hence there is a 3 year window for you to sell the home you had lived in.

As you are posting to an investment board many smaller investors build their portfolio by never selling their prior residence. Not exactly the best idea from a tax point of view if there is a lot of gain. It does say on the transaction costs. You also know the present home so you know deeply the condition, maintenance record, etc. Given the tax code presently it might be best to sell and capture the funds after tax (zero in this case it sounds like) and then consider an investment if you want to own a rental.

BTW - you could refi your present home and then move to a new home later. Only do this is you were going to continue to hold the present home. You could lock the rate compared to a HELOC.

John Corey

Bridge or HELOC Loan? - Posted by Bob

Posted by Bob on March 21, 2006 at 19:27:31:

Contemplating a new home purchase of $400k. What form of financing would be best? Old (present) house is paid in full @ $200k and would need about 3 - 6 months to prepare and sell. Can put $100k down on new home and mortgage $300k and pay down / refinance when old home is sold. Or should I put $100k down plus add $150k from a HELOC, mortgage $150k, sell house and pay off HELOC? Pro’s and con’s?

Also, for the tax free transfer of personal residence, how long do I have to sell old house for the exemption?

Thanks in Advance. Bob