Do I have to sell my home before I buy the next one?

Is the idea of selling before you buy stressing you out? While tons of people do it every day, it’s still a little nerve-wracking. Below are three common questions you may be looking for the “right” answers to; the kind of answers that make you feel 100% confident about this next step in your homeownership journey. 

1. Should I use the equity in my current home as a sizable down payment on the next one? Or use the money I have in the bank? 
2. What if I don’t get a high enough offer on my home in time?
3. How do I make the most competitive offer on my next home without breaking the bank?

In this article, we propose that a Bridge Loan may help you answer these questions. To put it succinctly, a bridge loan allows you to use the equity in your current home as the down payment on the next one before you sell. 

“How do I use the equity before I sell my home?” 

Let’s say you bought your perfect 3-bedroom/2-bath starter home five years ago. In the past five years, two things have happened: (1) you’ve paid down the principal balance and (2) home values rose. So, the current principal balance is $250,000 and, in today’s market, your home would sell for $330,000. The amount of equity in your home is the value of the home minus the principal balance. In this example, that would mean you have $80,000 in home equity. $80,000 of equity could translate into a 10% down payment on an $800,000 home. That’s a lot more house! 

The question is, how do you actually tap into that equity? Buyers and their Realtor will often arrange a contingent offer. You are telling the seller, “I promise to honor this offer as long as my current home sells on time.” Truth be told, it’s a stressful situation for both you and the seller. Taking out a Bridge Loan, on the other hand, will allow you to put that $80,000 down, give yourself breathing room to sell your current home, and then pay off the Bridge Loan when it does. 

Take the Rush Out of Selling 

Both you and your Realtor want to get the most out of your home sale. When the market is favoring buyers over sellers, you might be cornered into a situation of price cuts and offering large sums of seller credits. Imagine a situation in which you are trying to sell before you buy. You may be quicker to advertise a price reduction than if you were in no rush at all. Because Bridge Loans allow you to make an offer on your next home before selling, they also allow you the breathing room to get the most money from your existing home.

Your Offer, Made Competitive 

“Does the seller take the fact that I need to sell my home into consideration?” The answer is yes. If you are looking to purchase an extremely competitively priced home or a house in the ideal location, it would not be uncommon to find yourself in a multiple-offer situation. And given whatever characteristic is contributing to this, that’s all the more reason to do whatever it takes to get your offer accepted. Two ways in which offers could be sorted through are “Who offered the most?” and “Which sale will be the easiest?” A Bridge Loan helps you kill two birds with one stone. First, a Bridge Loan can help you offer more than the liquid cash you have available. If you really need to up your offer, you have the freedom to offer a combination of the money you have saved in addition to the equity in your home. Secondly, with a Bridge Loan, your offer will be non-contingent upon the sale of your existing home. Sellers like that. 

Thinking this might be your perfect time to buy? Talk to a mortgage expert to see how the investment you’ve made in your current home can help make your next set of homeownership dreams come true.