Just like last spring, we are seeing multiple offers on new listings coming to market and we know that offers contingent on the sale of another property often can be pushed aside. Yet, many clients are afraid to sell before they find a new home.
In our series “Sell Before You Buy,” we will share strategies to help the seller qualify for a mortgage on a new loan prior to selling their current home. The first strategy we’ll cover will be Bridge Loans.
A bridge loan pulls equity out of your client’s current home to use for a downpayment on a new one and will be paid off when their present home sells. By utilizing a bridge loan, the borrower can buy before their home is actually sold. Here are a few key facts:
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The bridge loan can pay off their current mortgage(s) and give them the remaining equity up to 80% of the value. This can actually lower the carrying cost of the existing home since the bridge loan is an interest-only term for 12 months.
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They could use a bridge loan to pay off higher interest rate debt as well as the existing mortgage, making it easier to qualify and an easier burden to carry two homes for a period of time.
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They can apply for the bridge loan, but if their home sells before or simultaneously with their new one, they never need to close on it!
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Once their home sells, that extra equity (cash in hand) is theirs to use any way they want, including to pay down and re-amortize the newly established mortgage (reduce the payment)
Key Mortgage can facilitate both a bridge loan and a new home mortgage simultaneously – making the process and experience for you and your client easier. If you would like more information on bridge loans or how you can incorporate them into a potential listing presentation, reach out to a Key Mortgage loan officer.
