Buying a home and keeping your present home

Buying a new home while keeping your current one can be a smart investment strategy—but it does come with financial challenges, especially when it comes to managing debt. Here are ways you can offset or manage the debt to make this dual-home scenario work:

🔑 1. Rent Out Your Current Home
Offset: Use rental income to cover the mortgage on your existing home.

Pros: Helps cover the mortgage or even generate cash flow.

Note: Lenders often count a portion of projected rental income toward your debt-to-income (DTI) ratio.

💰 2. Use Equity from Your Current Home
Offset: Take out a cash-out refinance, HELOC, or home equity loan to fund the down payment or reduce new home debt.

Pro: Lower the mortgage balance on the new home or avoid PMI.

Con: Increases debt on the existing property and monthly obligations.

📉 3. Refinance to Lower Monthly Payments
Offset: Refinance either or both homes to reduce interest rates and monthly payments.

Goal: Free up cash to manage both mortgages more easily.

💼 4. Increase Your Income or Reduce Expenses
Offset: Boost your DTI ratio eligibility or free up monthly cash.

Ways to Increase Income: Side gig, bonuses, rental income, etc.

Ways to Cut Costs: Pay down other debts, reduce discretionary spending.

🏘️ 5. House Hack
Offset: Live in part of one home (e.g., basement, ADU) and rent the other part out.

Useful If: You’re open to creative living arrangements to reduce out-of-pocket costs.

🧾 6. Tax Deductions
Offset: If one home is rented, you can deduct expenses like mortgage interest, taxes, repairs, and depreciation.

Talk to a CPA to maximize tax benefits.

📊 7. Consider a Bridge Loan (Temporary Fix)
Offset: Use a bridge loan to cover the gap between buying a new home and selling (or refinancing) the old one later.

Note: Short-term, higher-interest debt—use with a clear exit strategy.

Example Scenario:
You keep your current home and rent it out for $2,000/month. Your mortgage on that property is $1,500/month. The $500/month profit helps cover your new home's mortgage, easing your debt load and possibly helping with mortgage approval.

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