We held our breath not knowing what to expect once the Governor allowed Realtors to again conduct normal day-to-day activities. would our clients be too nervous to meet? Would buyers
WHAT’S A BRIDGE LOAN?
Dated: March 31 2020
Some Sellers are reluctant to list their current home for sale because they worry that it will sell and they will not have secured a new home yet for themselves. What options then does a Seller have? There are a few possible options for Sellers who will also be Buyers.
First, if the Seller wants to purchase a new construction home, the Seller would likely get a construction loan with draws for the builder during the months of construction. A few months prior to the new home being completed, the current home would be listed and hopefully the sale and closing would coincide with the closing on the new construction.
If the Seller has their current home paid off, or if they have equity in their current home (determined by an appraisal of the current home), they can either take out an Equity Loan for the new home or apply for a Bridge Loan.
A Bridge Loan allows a Buyer to make an offer on another home without making it “subject to the sale and closing of their current home”. In a market where there is not enough home inventory, most Sellers will not entertain Contingent offers. The Bridge Loan actually pays off the mortgage on the current home, and allows monies for the down payment and closing costs on the new home purchase. A Bridge Loan has a 6-month term and there are no monthly payments on the Bridge Loan itself, but once the current home sells, those proceeds pay off the Bridge Loan and accrued interest. As soon as a new home is found and the Buyer/Seller gets an accepted offer (and I also like to wait until that home inspection is completed), the Buyer’s current home should go on the market. If things go smoothly, the current home will sell reasonably quickly, but there is a built-in Six Month term on the Bridge Loan, so there is no pressure on the Seller to rush the sale. Bridge Loans also allow a Buyer to purchase the new home and do whatever updates are desired, (painting, carpet replacement, etc.) and then move into the new home at their leisure.
Call me to discuss the best options for you! 586-484-6781
Never before has it been as important to work with a knowledgeable Realtor during your real estate transaction. Today's housing industry is more complex, and requires the guidance of an educated prof....