Suggestions if you have found the perfect new property, but havent sold your current property
Question: We have found the perfect new home for our family in Frisco. It’s in just the right neighborhood that we’ve always wanted to live in and we absolutely love it! The problem is we haven’t sold the home we own now. Any suggestions?
Answer: 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 might 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 the loans value, minus the amount of the existing mortgage.
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442