Like the question of the chicken and the egg, homeowners planning to buy a new home must ask, â€œWhich comes first?â€ Do you sell first, and then look frantically for the new home, or buy first and risk maintaining and financing two properties?
Thereâ€™s more risk than just two mortgages. If youâ€™re rushed to sell your home to purchase a new one, you might be forced to list at, or accept, a lower price than expected. If youâ€™re pressed to buy a new home after selling your existing home, you may be forced into paying an unexpectedly higher price.
What is one to do? Build a bridge! Yes, there is a financing option called a â€œbridge loan,â€ so named because it â€œspans the gapâ€ between your sale and your purchase.
One type of â€œbridgeâ€ lets you simultaneously pay off your existing mortgage and make a downpayment on the new one. You make payments only on the new loan, and pay off the bridge loan when your old home sells.
Another kind of â€œbridgeâ€ allows you to borrow against the equity in your old home to make the downpayment on the new home. Both â€œbridgesâ€ still mean two loans, but the costs may be offset as a result of having more time to get top dollar for the sale of your existing home. See you on the other side!
Categories: Buying, Selling, Bennington VT