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| Bridging the gap between two homes... One of the most difficult parts of purchasing a home is timing the sale of your existing home with the closing of your new home. Assuming you need the equity from your current home to close on your new home you have two choices: Have your home sold or find a way to tap into its equity, at least short term, to use on your new purchase. Bridge or Swing Loan: You have most likely heard these terms. Basically you take a loan to cover the market value of your existing home and your new home loan. This gives you the use of your equity for the new home. Although you end up with a larger payment until your current home sells, once you factor in the convenience and the buying power you gain it may well be worth the cost. Usually these are interest only loans to keep the payment low and some bridge loans build in 6 months worth of payments upfront so your cash flow is not affected. Equity Loan: Another option is taking out a home equity loan on your existing home to use as the down payment on your new home. You will end up with a monthly payment for your current mortgage, equity line payment and new mortgage so be prepared to cash flow them until your home sells. This option usually has lower costs and is easier to obtain then a bridge loan. Do no underestimate how much easier it is to take your time to sell your current home and to be able to purchase your new home on your terms and timetable. While you may cringe at the thought of paying hundreds of dollars for these options you will save thousands in aggravation. Being in a position to negotiate for your new home with a loan in place and no contingency clause for the sale of your current home can often save you more than the costs. All bridges and equity loans should be obtained in conjunction with your new loan! Consult your mortgage lender for all your options and implications BEFORE you apply for any loan. You could inadvertently put yourself in a position where you can not qualify for your new loan. |
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