Ever wondered if it’s possible to buy a new home without selling your old one? Don’t let the fact that your home hasn’t sold yet stop you from making an offer on the home of your dreams, an Arizona bridge loan might just be the help you need.
What is bridge financing? It is a loan that gets you from one house to another. The process is simple, get bridge financing, buy a new house, sell your old home, and use the proceeds to pay off your initial bridge financing.
But there are a couple of approaches you can take.
With a bridge loan, you need to decide what to borrow against, be it the full value of your home or your current equity.
• Borrow Against your homes full value: Say your home is worth 300, and your mortgage balance stands at 200. With this approach, you would borrow up to 80 percent of your homes outstanding value. In this case, you would get 240 in bridge financing to pay back your current mortgage, and you would use the difference to make a down payment on your next house.
• Pro- you’ll only have one mortgage
• Con- The balance of your loan will be higher. The higher your loan balance, the higher your monthly payments will be.
• Borrow against equity: In this case, you’d borrow up to 80 percent of the 100 K in equity you currently have on your house, equating to 80 thousand in bridge financing. You then use this money as a down payment on your new home.
• Pro-You’ll have a smaller loan balance
• Con-You’ll have two mortgages, the one on your original home and the one on your new home.
Both strategies result in one thing, moving to a new home without first selling your old one. But of course like any loan bridge financing comes with some risks.
With a bridge loan, you need to be sure you can resell your old house in short order
The most significant factor to consider before applying for bridge financing is, “will my house sell in a few months?
Because you might cross the bridge of moving from one house to another, but you need to cross the bridge from one loan to another ASAP, or at least within six months.
Bridge financing entails a balloon payment, which means that during the term of the loan you are just making interest payments. You will be asked to pay back the remaining balance of your loan after a few months. If there are hang-ups with the sale of your first home, you will be on the hook to pay 10’s of thousands of dollars, which you likely don’t have.
As proverbial balloon payments popped around the nation in 2008, so did the mortgage bubble and we all know how that went. But don’t let the term balloon payment scare you away.
First determine which bridge financing strategy is right for you, be confident you can sell your home within six months and then go for it. Don’t let the fact that your home is still on the market keep you from pursuing your dreams, or better yet your dream home.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.