In a competitive market it can be challenging to get an offer accepted. Add in a contingency upon selling or closing your home, and the chances are even slimmer. There are a few strategies that you can use to buy your new home before having your current home under contract or sold.
The first and easiest strategy would be to pay cash (either from your own funds or borrow from a family member) for the new home then sell your current home. You can use your proceeds from the sale of your home to replace the cash that you used for the transaction.
If you don’t have cash (or a family member willing or capable to lend it to you), there are ways to use financing to accomplish your goal. A great mortgage loan officer will be able to go over the pros and cons of each scenario for your specific situation and let you know if you qualify for the program. It’s worth researching!
- Bridge Loan- A bridge loan is basically borrowing the equity from your current home to use as a down payment for the new home. When you sell the current home, the bridge loan will be paid off.
- Home Equity Line of Credit- You can apply with the bank to open a line of credit on the equity in your current home (or you may already have an open line in place). You can use these funds as a down payment or as cash to purchase the new home.
- New Mortgage- Already have funds for a down payment? You can simply take out a new mortgage and purchase the new home. After the sale of your current home, you can replace those funds or recast your mortgage. What does it mean to recast your loan? Its when you make a large, lump-sum payment toward the principal balance of your mortgage and your lender, then re-amortizes your loan. This means that your loan is reduced to reflect the new balance. Recasting lowers your monthly payments and the amount of interest you’ll pay over the life of the loan. Your interest rate and terms will be the same as when you locked it in initially.
Buying without selling first can be scary, but with the right plan in place it can go very smoothly. I’m happy to chat with you about your situation and help you come up with a strategy that will help you reach your goals. Click on the link below to get started!
P.S. Here is the link to download the FREE handout Strategies to Buy Before Selling.
