Did you purchase your home many years ago and you've been financially savvy, maybe you have a fantastic interest rate on the mortgage on your current home, refrained from refinancing to pull cash out, and you have a ton of equity in your home. You don't want to give up this great interest rate while you make your move, and now are weighing the options associated with pulling that equity out to purchase your new home by refinancing or taking out a home equity line of credit, while continuing to market your current home for sale. 

Pros:

• You do not need to wait until your home sells to move forward with your purchase
• You will be able to live your lives without the need to be prepared for showings of your home
• You may purchase at a lower value point in the real estate market range while the buyer of your previous home catches it further up
• If you take out a no cost Home Equity Line of Credit, you may keep the low interest rate you have on your first mortgage while paying little or no closing costs and low interest only payments on the HELOC
  

Cons:

• If you refinance, you may pay closing costs that will cut in to your available equity, unless the interest rates make enough sense for you to do a "no cost" loan, where you buy the interest rate up enough to get a credit that will cover your closing costs
• You do not know how long you will need to be prepared to pay double housing expense
•  Need to verify potential tax liabilities with your tax accountant to make sure you don't subject yourself to Capital Gains liabilities
• There is a provision in most loans that in order for you to get owner occupied pricing for your loan, you must occupy the home for 12 months after closing, so knowing you are planning to move, you would need to accept this higher pricing, further dipping in to your equity
• If you are planning to position your financing now and will remain in your present home for 12 months, but your home was listed for sale, the percentage you will be allowed to borrow against your present value will be limited if it has been listed for sale during the previous 6 months: "This loan casefile has been underwritten as a cash-out refinance. Confirm that the subject property has been owned by the borrower(s) for at least six months prior to the date of the loan application, and that the property is not currently listed for sale. If the subject property has not been owned for at least six months or the property is listed for sale, the loan is ineligible for delivery to Fannie Mae. If the property has been listed for sale in the six months prior to the date of the loan application, the LTV/CLTV/HCLTV for this cash-out refinance would be limited to 70 percent (65 percent for manufactured housing) otherwise the loan casefile may be updated and resubmitted as a limited cash-out refinance." (Fannie Mae underwriting guidelines; others are similar or identical)

I have found that many borrowers do not see the ramifications of not disclosing their intent to move out of the property, which is loan fraud.

See you at the closing table!

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com