I Own My Home and Want to Buy Another! (Smart Paths, Pitfalls, and Pro Tips)

Thinking about a next place while you already own? Here’s a clear, no-nonsense guide to your options, trade-offs, and steps—so you don’t get stuck between two houses (or two big payments).

Quick game plan

• Clarify your “why.” Rightsizing, location change, multigenerational living, or investment? Your why drives the how.

• Know your numbers. True market value, loan options, property-tax impact, capital-gains exposure, and cash reserves.

• Pick a path. Sell first, buy first (with financing), or hold and rent—each has a cost/risk profile.

Step 1: Get real on value (not Zestimates)

• Ask a top local agent for a data-backed pricing opinion and consider a paid appraisal.

• Use that value to model net proceeds (after payoff, closing costs, and commissions).

Step 2: Map the tax picture (before you list)

• Home-sale exclusion (§121): up to $250k (single) / $500k (married filing jointly) of gain may be excluded if you meet the occupancy tests.

• Large gains or high income? Talk to your CPA early. Sometimes it pencils to hold and rent (see “Convert to rental → 1031” below).

• Property taxes: Will you transfer your current assessment to the next home? (Rules vary by state/county and age.) Big deal for long-time owners.

Step 3: Choose your path to the next home

A) Sell first (lowest risk, cleanest offers)

• Pros: One mortgage at a time; strongest negotiating position on your purchase; clear cash in hand.

• Cons: Timing gap. Bridge with a rent-back, short lease, or furnished month-to-month.

• Best for: Maximizing net, avoiding contingencies, sleeping at night.

B) Buy first with financing (pay for convenience)

Pick the tool that fits your risk tolerance and timeline:

1. HELOC (Home Equity Line of Credit)

   • Interest-only, usually variable. You don’t pay if you don’t draw.

   • Watch: Rate resets; rare but possible line reductions in tight credit cycles.

2. Second mortgage (fixed-rate)

   • Keep your low first; add a fixed-rate second for down payment.

   • Two payments until you sell.

3. Cash-out refi (new single loan)

   • Simplifies to one payment, but likely raises your rate on the whole balance.

   • Harder to justify if your current first is ultra-low.

4. Bridge loan

   • Short-term, purpose-built. Fast but fee-heavy; read prepayment language carefully.

C) Keep current home as a rental (investor route)

• Convert to rental → hold 24+ months → consider a 1031 exchange into the next investment property to defer gains (talk to your CPA).

• Pros: Potential appreciation and income; tax benefits.

• Cons: Landlord duties; debt-to-income considerations for your next loan; local rent rules.

Making offers without drama

• Contingent on sale offers are weak in most markets. If you must, have your home listed, in escrow, and past key contingencies to be competitive.

• Stronger alternatives: Short closing on your sale + rent-back, or buy first with financing and close non-contingent.

Hidden costs to model (don’t skip)

• New property taxes (and whether you can transfer your base).

• Higher insurance premiums (especially in wildfire/flood/seismic zones).

• Carrying costs if you overlap: two mortgages, utilities, HOA, and taxes.

• CapEx setting aside: roof, HVAC, water heater on either property.

Decision cheat-sheet

• Want the highest net and lowest risk? → Sell first (+ rent-back if needed).

• Want convenience and can handle short-term cost? → HELOC/second/bridge and buy first.

• Want to build wealth and can manage a rental? → Hold and rent, then plan a 1031 later (with CPA guidance).

Common missteps (and easy fixes)

• Relying on online estimates. Get professional pricing and a desktop net sheet.

• Ignoring taxes. A 15-minute CPA consult can change your whole plan.

• Underfunding reserves. Keep 6–12 months of payments/liquidity if you overlap.

• Overleveraging. Don’t let today’s dream home become tomorrow’s stress.