We have received several phone calls from customers lately who own their home free and clear and are looking to purchase a new home. Ideally, they would like to sell their home first and buy the new home with the proceeds from the sale. However, it may be hard to get an offer accepted that is contingent on the sale of their current home. So, they are left with trying to figure out how to get the cash out of their current home before it sells so they can make a non-contingent offer on the new home. Here are some options:
1. Obtain a line of credit on the current home. By drawing on the line of credit, they can make a cash offer on the new home, or use it to make a substantial down payment and have a small loan on the new home.
2. A bridge loan: A bridge loan serves as a “bridge” between the sale of their current home and the purchase of the new home. It is a cross-collateral loan where it will lien both the home they are purchasing and the home they are selling. The lender will typically lend up to a per-centage of the value of the 2 properties. This may be enough to pay the new home in full. The closing costs can be rolled into the loan, too. They can pay it off once the home sells, or keep a balance on the new home.
3. Obtain a mortgage on the new home, with little down payment. Then, when they sell, they can payoff the mortgage, or pay it down. If the plan is to pay it down and keep a small mortgage balance, they may want to consider lenders that offer a recast.
See article for details: /recast-large-payment-principal-loan/
4. Pledged asset loan: If they have substantial assets invested with a brokerage, they may be able to obtain a loan against the assets and use it as a cash offer on the new home. They can pay it off once the home sells.
If you want to talk about any of these options, or discuss others, give us a call.
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