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#1
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Help Please: Bridge Loans
Cindy writes:
Hi, I may need a bridge loan as I have an offer accepted on a house with a contingency to sell mine within 90 days. I'm concerned with the state of the housing market and don't want to lose the house I put an offer on as it's smaller and much more economical than my current home. I understand the concept of bridge loans but don't know the specifics of how they work in terms of options, time limits, etc. Any experience with them? If so, I'd appreciate your comments...thanks! Here's where a good reputable independent mortgage broker can really add some value to your life. How to navigate this is really dependent on a lot of things in your specific situation, your credit, assets, etc. But, I had some overlap in my last home purchase, and rather than a bridge loan, what worked out for me was: I choose the ultimate payment I was comfortable with long term. I set my first mortgage amount on the new home to that level to achieve that payment once home A sells. Have a 2nd mortgage on the new home in the form on a home equity line. Once home #1 sold, I'd pay this down essentially to 0. In my case, I finanaced a total of 85% of the new home splitting 55% first mortgage, 30% HELOC. It turned out to be cheaper than only 80% LTV because it pushed the HELOC into a cheaper rate due to its size. To come up with down payment on home #2, I opened/extended a home equity line secured against home #1. This gave me the down payment money for home #2, room to replace the carpet in home #2, plus a lot of cushion to make payment out of for the other loans for about a year if house #1 didn't sell in a timely fashion. I ended up selling home #1 in 6months. I had a to pay a small early closure fee on this HELOC because it was only open a few months, but it was only a few hundred bucks of actual closing costs to reimburse the lender on the no-closing cost HELOC. Once home #1 closed, the HELOC and first mortgage against it were paid off, and cash from closing was used to pay HELOC on home #2 down to 0, leaving me just with the first mortgage on home #2. You'll need good credit and other assets to show (e.g. 401k or other investments) to have the lender comfortable, but it all worked nicely for me. There are a few ways to skin this cat, but that was the one that made the most sense for me. Also it's time to do a gut check. Owning two homes and watching the negative cash flow even for a few months can wear on ya. I know it stressed me out quite a bit, but it all worked out and it just makes the new joint that much sweeter. Best Regards, -- Todd H. http://www.toddh.net/ |
#2
Posted to misc.consumers.house
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Help Please: Bridge Loans
Cindy wrote:
What is HELOC? Home Equity Line of credit - also known as a second mortgage. It's only been ont he market 3 weeks but the market isn't looking very good right now. Three weeks isn't a long time. Especially as this is very early in the selling season. If you go 60 days, you may need to rethink your asking price and do some creative marketing. |
#3
Posted to misc.consumers.house
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Help Please: Bridge Loans
Cindy writes:
Thanks for the insight, Todd. Unfortunately I'm not in a position to do much with my current house as I'm at about 80% on financing vs. appraised value. What is HELOC? Home equity line of credit. HELOCS are very flexible and can be drawn on or paid down very flexibly. You only pay interest on the amount of money you have out at a given time. Kinda likea credit card with more reasonable terms. This is as opposed to a home equity loan where you draw all the principal of it at one time, and pay it back over a schedule. The gut check comment is definitely a concern for me. I so want this new place and the reduced monthly cash flow it will generate and want to get out of my current house. It's only been ont he market 3 weeks but the market isn't looking very good right now. Hopefully better than it looked for me in October in Chicago last year though! The good news is that your contract is written such that you have 90 days for free. -- Todd H. http://www.toddh.net/ |
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