[Michele]

My parents want to purchase a condo. But want to purchase before selling their house. How would this work?

Can they take $$ out of their IRA and use that to purchase the condo cash?

Then when they sell their house where do they park the money from that?

TIA!

[Joel]

We are doing something similar and the are a variety of options ….
We chose to take out a mortgage for the new house and put 20% down (this came from my Roth).

Once we sell the old house we will pay off the mortgage and move any extra to our brokerage account and invest it.

Pros:
– Cheaper than a bridge loan
– Larger downpayment was seen as “positive” by the seller. We did keep a mortgage and appraisal contingency

– Gave us time to find the right place, pack, move and then sell. Frankly, it was exhausting for us and am very glad we approached it this way.

Cons:
– Have an extra mortgage payment until old house sold. Fortunately, we could absorb the Cashflow for the short term but it would be an issue for the longer term.

– Spent down our Roth a bit (we had already completed Roth conversions to our yearly target)

[Tony]

I’d rather pay for a bridge loan than pay taxes on an Ira withdrawal.

[Lisa]

Discuss with mortgage broker. There’s often an opportunity for a bridge loan, to bridge the gap between selling and buying.

They also may be able to buy with little /nothing and then after sale can recast the loan

[Deepa]

They might also have an option to do a SBLOC-a securities backed line of credit from their brokerage account …if it’s short term that they need the money it might be worth looking into.

The rates are higher than mortgage rates but they could be approved in a day or two and no loan origination costs like a traditional mortgage.

[Shawn]

One option I’ve had offered – the house lender can do a HEL/HELOC for the down payment and moving expenses then it gets collected on the sale of the house.

It lessens the cash you need to pile up in advance.

[Natalia]

There is a 60 day rollover rule for retirement accounts, you can take money from you retirement account and put it back within 60 days without any taxes and penalties. Look it up.

We did it when my client bought a new house for cash from IRA and then sold her house and put the money back.

But things had to be ready and market conditions favorable to sellers.

[Rick]

Heloc on current house and rest from cash or brokerage?
Many heloc waive closing costs but have a timeframe of heloc is closed the fees are due which is likely in your case.

They shouldn’t be of concern but something to know so no surprise.

[Michael]

There’s a multitude of ways to do this. Without more information it’s impossible to discuss in any detail.

The IRA would be one route, albeit an expensive one. A more common one would be a bridge loan or simply taking out a mortgage on the new property and paying down the balance once their current home sells.

[Author]

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