What is the best way to carry two mortgages?

Asked by Jim J, Glendale, WI Sun May 27, 2012

We currenly have a condo that we have listed. We have had it listed for awhile and it now at a price point that is only about $7k more than what we owe. We just found a house that we really like and got an accepted offer with a home of sale contingency. We are worried that we could lose the house if we ca't sell our condo. We like the house so much that we are considering carrying two mortgages until our condo sells. We currently have a 15 yr mortgage on our condo. If we were able to refi that to a 30 yr or an ARM it could reduce our principal and interest in almost half which would help us keep our monthly overhead down. We can't rent according to our association so that idea is out the window. If our condo ends uo. Eing upside down, can we do a short sale on it. Would there be any repercussions if we bought the house first. Does anyone have any good advice for this situatiin? Thanks.

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Linda S. Cefalu’s answer
Linda S. Cef…, Agent, Franklin, WI
Tue May 29, 2012
If you can afford two mortgages, it is doubtful that your current lender will grant you a short sale. And keep in mind that you must be able to prove a hardship. Also, keep in mind that we ARE a deficiency state and the bank will most likely come after you for that if they grant the short sale at all.

And........unless the law is extended, as of December 31st of this year, (2012), the Debt Forgiveness Act is going to expire. The ramifications of this are that the bank can then report your deficiency to the government and it could be added on to your yearly income which would cause you to owe taxes on that difference in the event you have a deficiency.

A refinance of your condo is going to require an appraisal unless someone is willing to pay cash. If it doesn't appraise, no refi. It has been my experience in the past several years that condos are extremely difficult to move right now.

Arm loans are very risky and I would not advise them. That is part of what got us into this mess in the first place. No one can tell you for sure how things will be when that arm comes due. Chances are, if you cannot afford the payment on a conventional loan right now, you won't be able to in two or five or ten years from now.

I would strongly advise you to seek out expert advice from an accountant, financial adivisor and/or perhaps an attorney. You are contemplating something that has the potential of becoming a disaster.
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Wisconsinmor…, , Wisconsin
Mon Dec 24, 2012
You could change the term on the condo from a 15 to a 30 to increase cash flow however it cannot be listed in order to do that. You could also drop the price to sell it quicker to allow you to buy the other property. You cannot abandon one to buy another. Your condo may be eligible for a HARP refi without an apprasial if it is a Fannie or Freddie and you opened it prior to June 2009. Thank you
0 votes
Charles Dail…, Mortgage Broker Or Lender, St Paul, MN
Sun May 27, 2012
That would depend on what type of financing you want to use for your purchase. Are you planning on using FHA, VA or Conventional (Fannie Mae/Freddie Mac) financing? Each product has different equity, cash reserves and debt to income ratio requirements.
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KerryAnn Dou…, Agent, Hales Corners, WI
Sun May 27, 2012
First of all, refinancing the condo will require you to take it off the market. Second, I would ask your lender if there are any pre-payment penalties on completing the refinance since your goal is to sell the unit. Typically there isn't, but safer to ask than be sorry. If you do not purchase the new home first, completing the short sale will require you under current underwriting guidelines to wait 2-4 years to be able to purchase again if you are planning on walking away from the remaining debt on the condo. If you were planning on paying the condo off in it's entirety upon the sale using your own funds then the only problem that may arise from that situation is how much has it dug into your downpayment savings. Also, how long are you planning on holding the condo? If you continue to market it for an entire calendar year and you have taken out an ARM that adjusts in 12 months, the overhead you might be saving now could become unmanageable in 12 months. Be sure you know the exact terms of the ARM.

The simple answer - if you are asking forgiveness of the remaining mortgage balance on the condo you should buy first. If you were planning on bringing cash to close to complete the sale of the condo then it doesn't matter.
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Tim Moore, Agent, Kitty Hawk, NC
Sun May 27, 2012
You CAN'T just decide to do a short sale. A bank must agree to it and you can't just decide, "Oh Well, I'll screw the bank and they will go along with it because it's all about me". It does not work that way although I am sure many short sale listings are just that, a wish by the home owner to make it go away at the banks expense. You better do some real investigation about what you are planning or you are going to really be in a deep hole. You better look up deficiency state and find out if WI is one or not, if it is the bank can come after you for the money they lose in a short sale.
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