Fiance owns a house. How can this affect buying a home in the future?

posted 3 years ago in Home
Post # 3
10384 posts
Sugar Beekeeper
  • Wedding: September 2010

You can own multiple properties at once. Since it is paid for, it won’t count as debt. You guys can decide whether you want to use it as collateral or not to up the amount they will approve a loan for. I think it may disqualify you from new homeowner loans, but i’m not 100% on that, since he inherited it but did not buy it.

Post # 5
672 posts
Busy bee
  • Wedding: November 2012

Shouldnt affect purchasing a new house at all! People buy and sell houses all the time, the fact that you dont have a mortgage on it is huge! They will consider the house an asset.  Or if you dont have money for a down payment you can take an equity loan out on that house (collateral) and use it to buy the new house and then when you sell the old house you will just owe whatever you borrowed against it.  We owned a house when we bought our new one but we needed the money from the sale of the old house to buy the new house so we didnt have an option of keeping it.  I wish we could have though, it was the perfect beach rental house!

Post # 6
3889 posts
Honey bee
  • Wedding: September 2011

@HelloRaeven:  That means to take out a mortgage on the home you already own. This gives you a TON of options; you can take a mortgage on your existing home to cover the down-payment on a new home, which tends to qualify you for more favorable mortgage rates on the remainder plus take the PMI requirement off the table (PMI = personal mortgage insurance = usually about 3% of the loan amount, spread across all your payments, which covers an additional insurance policy the lender will take, to protect them in case you don’t pay your mortgage. If you put 20% down on the new home, you don’t usually have to pay PMI). You would then either sell the old home and pay off the mortgage you took, or rent out the old home and use the rent to cover the mortgage.

You will not likely qualify for any first-time-homebuyer tax credits or rebates. These are usually in the $3-10k range but since your fiance is a homeowner, he can’t be a first time buyer any more.  But that is not the end of the world.

If you choose to move into a new home and rent out the old home, be sure you fully understand the tax impact in your jurisdiction. In my area, real estate taxes on owner-occupied homes are about 20% of the taxes on the same property that the owner rents out. It can be very significant. Your realtor or CPA should be able to advise you as to the tax rates in your area.

Post # 8
1499 posts
Bumble bee
  • Wedding: June 2012

@HelloRaeven:  If you like the house and location of the house your FI owns, you can also take out a home equity line of credit against the house to update it.  That is probably what I would do.

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