We owe $300,000 on our current mortgage, which has about $350,000 in equity. The house is too small for our growing family, but we’re reluctant to sell it because we have a 2.5% interest rate. Our plan would be to rent it out for around $800 more than the monthly mortgage payment and buy another house.
Here’s our situation:
Combined income: $215,000
Savings: $100,000 for a down payment
The size of the house we want: $900,000 in our area
Is it even possible to buy a second home without selling the first? Would this be a good financial decision? What would you do?
$215K seems a bit tight for a $900K house with PMI. Be cautious about rental property maintenance—it adds up quickly, and tenants often demand fixes you wouldn’t bother with.
Don’t rely on rental income to cover your old mortgage. Only proceed if you can afford both mortgages without rent coming in. Tenants can skip payments, and you’ll need funds for unexpected repairs or legal battles.
Your DTI likely won’t support a second loan for $900K. Rental income is often only partially counted, and additional taxes and insurance will eat into your $800 monthly profit. Selling your current home and upgrading with the equity might be a better move.
As a mortgage banker, I’d recommend selling the first house and using the equity for a larger down payment. Holding onto the old house only makes sense if you’re prepared for market fluctuations and maintenance headaches.
No, don’t do it. Even if you can make the numbers work, the stress of carrying two mortgages isn’t worth it. Sell the house, take the equity, and upgrade responsibly.
We did this successfully, but you’ll need to talk to a lender first. Requirements may include proof of rental agreements before approving a second mortgage.
With only $100K for a down payment, you’re likely looking at PMI and a very high monthly payment. Have you considered why you need a $900K house instead of something more modest?
We did something similar but used a HELOC for the down payment and built an ADU on our first property to generate additional income. It’s a complex strategy but might work if your numbers align.
Call a qualified mortgage lender. Every situation is unique, and they’ll be able to give you a better idea of what’s possible for your specific circumstances.
Don’t sell just to sell, but also don’t overextend yourself. If the numbers don’t comfortably work without relying on rental income, this isn’t the right move.
We did this and it’s manageable, but make sure you can cover both mortgages without rental income. Being a landlord is more work and stress than most expect.