Real Estate & Mortgage Insights

If You Think You Need a Bridge Loan

You're thinking of buying a house so you go out with a real estate agent and find the perfect "move-up" home. You fall in love with it. If you're a married man, your wife falls in love with it. Same difference. So you present an offer. The only problem is that you need to sell your house in order to buy that house.

But you haven't even put your house on the market yet.

So you make a "contingent" offer. Your offer to buy is contingent upon your ability to sell your house in time to close.

You haven't even listed your house yet. That's a little bit "too" contingent for most sellers nowadays. They are likely to turn you down.

Bummer.

In hindsight, you realize you should have listed your house first, got an offer (and accepted it), then gone out looking for a new home.

But it's too late and you really want that home.

The real estate agent suggests you get a "bridge loan." If you have enough equity in your present home, this is a special loan that allows you to get some cash so you can make a down payment and buy the new home. Interest rates are high, points are high, and there are costs and fees involved.

It's cheaper to borrow from your 401K (if you have enough money in it). Lenders allow that as a source of funds for down payment. Any secured loan is an acceptable source of funds for a down payment. If you have stocks or bonds or an insurance policy, you can borrow against that, too. Even a car. Any loan "secured" by a physical or financial asset.

Or you can get a "gift" from a family member to make up whatever shortfall you need.

Or...if you have enough equity and can qualify for a bridge loan, you can qualify for a home equity line. It only costs about $350 at your local bank.

Just get the loan before you list your property for sale.



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