Imagine for a moment that after looking at houses for sale you found the perfect new home for your family. It's in the right neighborhood that you've always wanted to live in and you absolutely love it! The problem is that you haven't sold the home you own now.
You could make an offer on the new home contingent on selling your existing home first, however, most sellers are reluctant to accept such an offer. If they do accept your offer, you will probably end up paying more for the property as a result. Having to make a contingent offer almost always results in a major loss of your negotiating power.
Writing a contingent offer may also cause you to become more desperate when trying to sell your home first. You may accept an offer you wouldn't normally have considered just because you don't want to lose your new dream home.
This is where Bridge Loans can be a lifesaver. Bridge loans allow you to use the equity on your existing home as collateral on a new home loan thus "bridging" the gap and allowing you to move in to your new home. You then put your house on the market and when it sells or at the end of the loan term, you pay off the bridge loan.
Most lenders offer more flexible terms for bridge loans than for standard conventional mortgage loans. To alleviate the financial burden of making double house payments, lenders will design more lenient repayment terms.
Some will simply defer payment until your existing home sells. Other lenders will have you pay only interest payments, which are much lower, and then the principal would be due when the house is sold or at the end of the loan term. Generally, most lenders set a maximum loan to value ratio of 75%. Meaning you can only borrow up to 75% of the loans value, minus the amount of the existing mortgage.
For more specifics on how bridge loans may work for you, I recommend contacting your local lender. If you're in the Newton and Jasper County area of Iowa, I'd be happy to refer you to a couple of great mortgage lenders that would love to help you out.
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Buying or selling a home or acreage is a major life choice. Whatever your real estate needs I can help you reach your goals with confidence. My expertise of the Newton and Jasper County, Iowa area will give you the best possible experience from start to finish.
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Scott Neasham, REALTOR
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Newton, IA 50208
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