Although there are countless questions that sellers have about buyer funding, they also have a number of concerns about their own mortgage loans. In addition to packing up, staging the property for showings, and aligning yourself with a reputable agent, you also need to formulate a plan for ensuring that profits are optimal after your mortgage has been paid off. If you intend to buy a new home just before or right after this sale closes, there are a number of important things that you should know about your current loan and its potential impact on you proceeds.
Penalties for Prepayment
If your loan has prepayment penalties, you could be responsible for a hefty fee for paying the loan off early. This fee can have a significant impact on your net proceeds. If you purchased real estate in Downtown San Diego before the housing crisis of 2008, you are more likely to have prepayment penalties than people who secured their mortgages after this time. Check your mortgage note for any provisions that outline a prepayment penalty. If one exists, expect to pay fees equaling six months of interest on your remaining loan balance.
Paying Off Your Mortgage Loan
Once you sell your current property, your escrow company or attorney will use the buyer’s funds to pay down your mortgage loan. This is usually done just one to two days after the sale has closed. Once your lender is paid, you’ll receive your net profits from the sale along with a final closing statement.
Taxes on Capital Gains
Homeowners are exempt from taxes on capital gains from property sales if they’ve lived in their condo or loft in Downtown San Diego for at least two of the last five years. This exemption covers capital gains up to $250k for single sellers and up to $500k for married couples. Deduct the tax basis and the costs of selling your home from your sales price and the resulting number will represent your capital gains.
Calculating Your Net Proceeds
If you intend to buy a new condo in Downtown San Diego and need a new mortgage loan to do so, you’ll need to present your new lender with an estimate of your net proceeds from this sale. You can work with a mortgage or tax advisor in order to get estimated net proceeds figures that are worthy of submission. Only a licensed tax professional, however, can provide you with an official estimate. This estimate will give your new lender a better understanding of your expected down payment.
Buying Before Selling
It is not uncommon for sellers to start shopping for new homes before their current properties have sold. This is best done by qualifying for the total financial obligation for both properties. If you have limited debt in other areas and a generous amount of income, this shouldn’t be a problem. Otherwise, you can shop around for a lender who is willing to exclude the debt for your primary residence when reviewing your loan application. You’ll have to provide you lender with market data on comparable sales in you area along with a signed listing agreement.
Learn more about the buying or selling process from the experienced and friendly agent at 92101 Urban Living. Give us a call at (619) 649-0368 to schedule an appointment or showing. ')}