Transfering debt from home sale?

kotenaMay 5, 2009

We have a condo, which will probably sell below our mortgage amount (about $20K), i.e. we will owe the bank about $20K. We are buying another house at the same time. Can we transfer this $20K debt under the new house and have it as part of the new mortgage? I just do not feel great about taking cash out, conidering that the new house will require quite somework to do before move in.

Can we do short sale?

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Can you directly roll this debt into a new house? No.
Can you indirectly? Yes. You put down 20K less than you thought you were going to to put down.

If you have no cash and your plan is to walk away from being 20K upside down and buy a new house, I find that outrageous.

You should pay the 20K that you owe instead of stiffing the bank with a short sale.

    Bookmark   May 6, 2009 at 12:57PM
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I don't think your lender will agree to a short sale unless you're in financial distress, cannot keep up the payments on the condo, etc, although you might be able to get them to accept a form of short sale if you sign a promissory note for the difference.

& the lender for the new home isn't going to want to loan more than the home is worth;
the new home is collateral for the loan.

You might come out better leasing the condo.

    Bookmark   May 6, 2009 at 2:45PM
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Apparently we haven't learned much as a country.

A short sale means you are defaulting on your loan obligations. You owe the bank more money than you are paying, but the bank agrees to it because they think your only other option is foreclosure. No bank in their right mind would let you take $20,000 of their money and then turn around and give you more money.

It sounds like you don't have enough money to buy a new house at this point. You need to have enough cash on hand to pay off your current debt, make a down payment on a new home, and still have money to do whatever renovations you want. If you can't do that, then you aren't in a financial position to purchase a new home.

Even if you are able to find a lender that will help you in this plan, do not do it. You are setting yourself up for financial ruin. You need to be reducing the amount you owe, not digging a deeper hole.

    Bookmark   May 7, 2009 at 10:33AM
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So you would have to bring $20K to the table to sell the condo.

Let's say you want to buy a house that is $400K (and appraises for that) and you have a 20% downpayment of $80K. You could try to get the lender to approve the sale with only $60K down and use the other $20K to discharge the amount owed on the condo. Maybe they lender would agree to less downpayment, maybe not. But you can't get them to call the house worth $420K if it appraises for $400.

You can't do a short sale on one property so you can walk away from your debt, and then turn around and buy another. No lender would go for that.

    Bookmark   May 8, 2009 at 6:29PM
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