Question: We want to purchase a new home and get ours onto the market. What happens if we find something we want to buy before we get our existing place sold?
Answer: That’s a good question and it is a situation that many people find themselves in as they are making the transition from one property to another. Imagine for a moment that you have found the perfect new home for your family. It’s in just the right neighborhood that you’ve always wanted to live in and you absolutely love it! The problem is you haven’t sold the home you own now.
You could make an offer on the new home contingent on selling your existing home first, however, most sellers are reluctant to except such an offer. If they do accept your offer, you will probably end up paying more for the property as a result. Having to make a contingent offer almost always results in a major loss of your negotiating power.
Writing a contingent offer may also cause you to become more desperate when trying to sell your first home.
You may accept an offer you wouldn’t normally have considered just because you don’t want to lose your new dream home.
This is where bridge loans can be a lifesaver. Bridge loans allow you to use the equity on your existing home as collateral on a new home loan. You then put your home on the market and when it sells or at the end of the loan term, you pay off the bridge loan.
Most lenders offer more flexible terms for bridge loans than for standard mortgage loans. To alleviate the financial burden of making double house payments, lenders will design more lenient repayment terms. Some will simply defer payment until your existing home sells. Other lenders will have you pay only interest payments, which are much lower, and then the principal would be due when the house is sold or at the end of the loan term.
Generally, most lenders set a maximum loan to value ratio of 75%. Meaning you can only borrow up to 75% of your homes value, minus the amount of the existing mortgage.
If you would like more information on bridge loans or any type of mortgage financing, give me a call. I’d be happy to get you started in the right direction.
For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours. Want to know the value of your Summit County property? Visit www.SummitHomeValue.com