Stuck in a home where your value is underwater and you can’t afford to sell? I know the feeling. So, I’ve got some strategies to help you make a move.
Strategy #1 is to rent your current home. Sounds easy, right? Here’s why it may be the right strategy for you: Did you know that if you have documented rental income on a property, you may be able to claim 75% of that monthly rental income to offset the mortgage debt you have on your current home, when you apply for a new home loan? Here’s a scenario:
·You are qualified to spend $2,500 per month on a home purchase (mortgage, taxes & assessments).
·You have a current home that costs you $1,200 per month;
·As a result, you can only spend $1,300 per month on the new home as you have to carry costs for both.
·Your current home is valued less than what you owe and you can’t afford to sell it today
·But, you can rent your current home for $1,000 per month.
·If you rent your current home for at least a year, you can reduce that $1,200 per month debt by $750 (75% of the $1,000 monthly rental income)
·The amount you can now qualify to spend per month on a home is $2,050 ($2,500-$1,200 + $750)
While this may take at least a year to make a permanent move, it’s a faster option than sitting and waiting for the housing market to rebound – potentially 5 to 6 years.