Q: We have signed a sales contract to purchase a house at the end of next month. Our current home is up for sale.
What happens if our home doesn’t sell before we buy the next one? I understand we will have two mortgage payments, but is there a program out there that can help create a bridge between two loans?
A: Yes, there is a short-term loan program known as a “bridge loan” that can help you cover extra cost you’ll have of covering your new mortgage before you’ve sold your existing home.
You may also be able to use a home equity line of credit on your existing property to accomplish the same thing. Essentially you’d borrow against your equity to get the cash for the down payment on the new home.
Please talk to several mortgage lenders about these options and how much they will cost each month. Bridge loans can be much more expensive than home equity loans or lines of credit. They are typically a short term solution to help you during the transition when you haven’t yet sold your current home but have purchased a new home.
Once you close on the new home, do what you can to sell your old home as quickly as possible. Juggling the expenses of two homes at the same time can cause home buyers to panic. If you do get an offer on your existing home that’s “in the ballpark,” try to make a deal and close as soon as possible. Some homeowners get hung up on getting their “price” on the sale and forget that for each month they hold on to their old home, the money they pay for the old home is lost money.