Bridging the Buy-Or-Sell-First Debate

For obvious reasons, many move-up buyers prefer to sell their current home before buying another.  They avoid the risk of paying on two mortgages, and have the ready cash to invest in down-payment and closing costs.

But what if you find a new dream home before selling the one you already own?  (Or what if you don’t want to sell your current home unless you find your East-facing home with a pool and room for a garden in the right school district?)  How can you qualify for a new mortgage while still paying on an existing loan?  Through the help of bridge financing.

In reality, a bridge loan is a short-term second mortgage secured by the equity you hold in your current property.  Although typically issued for three to six months, some lenders may consider a longer bridge loan term.

For example, a bridge loan of $30,000 would cover all closing costs plus a 10-percent down-payment on a $250,000 property.  Unlike standard home equity loans that require monthly payments, a bridge loan is paid in a lump sum from the first home’s sale proceeds.  Of course, an appraisal must demonstrate that your home’s expected sale price will satisfy both the first mortgage plus the bridge loan.

To move quickly on a prime property even if your current home isn’t ready to sell, be prepared.  Talk to my lender about the availability and terms of a bridge loan before you start to look.  His name is Tom Testerman and he would be happy to explain all the details to you.  (949) 422-4497.  Have a great weekend.

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