Thanks for your suggestions and advice.
I also feel option 2 is the best option, we only need to pay additional mortgage interest.
But the problem is that seller want to close on 12/31, but based on current situation, agentA may not be able to close the purchase loan by end of year. I know seller is very firm on this date (Agent A has not discussed this latest problem with him yet).
We did not forsee this being a problem at all since our income is more than sufficient to cover both mortgages. Even both agent did not think there was any risk for us not getting a loan.
The reason we keep both houses is just for convenience (not having to live in a house which is under renovation). We did not intend to rent the house out.
