Below, is a calculation making the following assumptions; it takes nine months to close on a new house
after selling the old house; houses in the area [both old and new houses] are appreciating at 1% per
month; interest earned on bank deposits are at 1% per annum; storage costs are $1,000 per month, a
conventional bank loan is not available because the homeowner does not qualify and has to use a
private loan company; the costs for the private loan are 9% plus 2 points; the interest rate on the old
house is 3% per annum.
Scenario:
Homeowner owns a house worth $1,000,000
Current 1st mortgage $(200,000)
Equity $800,000
Desire to purchase home worth $1,400,000
Available cash in bank $100,000
Per Month
Total cost of not buying target house right away
Does it Makes Sense to
Buy a New House before
Selling the Old One?
Per Month
Months
$174,000