Selling investments to cover VA loan assumption

Personal Finance
3yFollow

Selling investments to cover VA loan assumption

Nicholas Curcuru
Member since 2021 · 9 posts · 5 votes

I just moved back to the USA and want to buy a property. The property will be my personal residence (VA loan requirements) but it will be a house hack as well. I am planning on getting 2 roommates to cover almost, if not all PITI. Interest rates are still high for me but I can use the VA loan assumption process to get the seller's existing, and likely very low interest rate of 3% or less. The largest problem with this route is I need to pay the seller's equity and appreciation amount over the existing loan. Given the amount of market appreciation, this can be $100k or more.

I have over 100K of non-retirement investments in mutual funds in a brokerage account that I wish to sell to pay for this 'down payment' on the loan assumption. The problem is I want to avoid getting murdered by capital gains taxes. Right now, for 2022 I am at a loss.

I am looking for insight of how to sell smartly between now and the end of the year as well as more in first few days of January to maximize my VA loan assumption and tax situation.

1Reply
16 views

Most Popular Reply

Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
3y

I agree with @Chris Davidson, he's a smart guy. It sounds like you are trying to shove a square peg in to a round hole. I'd keep things simple if I were you- house hack with your own VA benefit. Find a decent home that works for you and buy it. Keep in mind that if you are paying $1500 a month for your rent now and you house hack and your payment goes down to $300, that's $1200 in profit every single month. A successful house hack doesn't have to cover 100% of your liabilities, offseting your current expenses can be a huge win.

To answer your question directly- you'll end up way further ahead doing what I've suggested rather than paying $100k for a 3% interest rate on top of a massive tax bill for cashing out your retirement. The juice is not worth the squeeze.

Thank you for your service and good luck out there!

3Reply
See this reply in the discussion

3 Replies

Jump to latestLatest
  • Chris Davidson
    Real Estate Agent · Boise, ID · Member since 2016 · 1k+ posts · 888 votes
    3y

    @Nicholas Curcuru given it's the last day of the year now (business day) there is no way to sell and optimize. If you had started earlier in the year you could of used the lost harvesting tactic. This is where you have a stock you are holding LT dip below you basis price and you sell capture a loss, and turn around and buy it to set a new lower basis. 

    You have a lot going on here with assumptions and likely a large down payment just for a low rate. May not be the best use of capital. However if the deal makes sense go for it. Best of luck! 

    3Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    3y

    I agree with @Chris Davidson, he's a smart guy. It sounds like you are trying to shove a square peg in to a round hole. I'd keep things simple if I were you- house hack with your own VA benefit. Find a decent home that works for you and buy it. Keep in mind that if you are paying $1500 a month for your rent now and you house hack and your payment goes down to $300, that's $1200 in profit every single month. A successful house hack doesn't have to cover 100% of your liabilities, offseting your current expenses can be a huge win.

    To answer your question directly- you'll end up way further ahead doing what I've suggested rather than paying $100k for a 3% interest rate on top of a massive tax bill for cashing out your retirement. The juice is not worth the squeeze.

    Thank you for your service and good luck out there!

    3Reply
  • Daniel Murphy
    Financial Advisor · Saint Paul, MN · Member since 2016 · 190 posts · 143 votes
    3y
    Quote from @Nicholas Curcuru:

    I just moved back to the USA and want to buy a property. The property will be my personal residence (VA loan requirements) but it will be a house hack as well. I am planning on getting 2 roommates to cover almost, if not all PITI. Interest rates are still high for me but I can use the VA loan assumption process to get the seller's existing, and likely very low interest rate of 3% or less. The largest problem with this route is I need to pay the seller's equity and appreciation amount over the existing loan. Given the amount of market appreciation, this can be $100k or more.

    I have over 100K of non-retirement investments in mutual funds in a brokerage account that I wish to sell to pay for this 'down payment' on the loan assumption. The problem is I want to avoid getting murdered by capital gains taxes. Right now, for 2022 I am at a loss.

    I am looking for insight of how to sell smartly between now and the end of the year as well as more in first few days of January to maximize my VA loan assumption and tax situation.


     You can still get this done before the end of the year.  You mentioned that your account was a NON retirement account.  Assuming it's a taxable account? 

    And that you are at a loss for the year, but are you at a loss overall?  Log into your account, click on "cost basis"  if it's negative, you can sell everything at a loss today & you should have no tax consequence.  

    If it's at a gain, you'll owe either 0 or 15% based on your total income.  And only on the gains. But you may be able to write off some of the costs associated with the home purchase to offset any gains.  

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free