Bridge loan for buying and selling?

[dancingirl21]

Can anyone explain a bridge loan to me, or tell me if it might be appropriate in our situation?

DH and I really like our house. We recently completed a full first floor renovation and finished our basement, along with smaller updating projects. We've put over 6 figures into the house in 5 years. We had a realtor come and give us a market analysis last night. We definitely have more projects on our list - siding, new concrete driveway, all upstairs carpet replaced, hopefully a 3 season room. But adding all that up is more big money. We wondered if it might be an option to move into something very similar, but a little more updated/finished than ours. 

I wasn't really willing to entertain the idea until the realtor told us the number we could likely sell for. It's...a lot. We would make a lot of money on this house. And she thinks we would sell incredibly quickly. However, we want to stay within the boundaries of our kids' school, so it won't be a small ask. We aren't willing to sell this house without knowing we can get what we want. We would need to make an offer on something else without contingencies to be considered, then sell ours after an accepted offer. 

The timing of it seems scary and I'm not sure we would qualify to cover both mortgages at once. DH is going to call the lender we have used in the past to see, but does anyone have a similar situation and can tell me what you did? 

[dancingirl21]

Never mind. I should have done a search for this first. I found many helpful threads.

[Susie]

We bought and sold in late spring 2021, so I'm pretty fresh off a similar decision.  We did not go the bridge loan option, but I've talked about that in past posts so you've probably seen those.  We also didn't do a contingency for the sale of our house.  We never would have gotten an offer accepted that way, so it wasn't worth trying.  

The one thing I would caution on, is before you get big stars in your eyes about what you could get for your current house, make sure you're also assessing honestly what you would spend to get what you want right now.  Make sure the math works for you.  We bought high and sold high by a similar $ amount, which was a larger % on our less expensive sale than our more expensive purchase.  I'm not sure I'd have jumped to sell and move if that wasn't the case.

The other piece is just availability of properties to buy.  We didn't list our house for sale until we were not only under contract, but also through inspections/contingencies on our purchase.  I was terrified at the idea of possibly holding the bag on two mortgages, but I was more terrified of being homeless if our sale went ahead but our purchase fell through.  The purchase process was fraught with months of low inventory, multiple offer contests, etc., while selling was like... people competing to get showing time slots, multiple above-asking offers coming in right away.  Anecdotally, I've been watching my local market for funsies, and this year seems even tighter than last year, so far.

The bottom line is that I would not make this decision based on what you can get for your house.  Everything's high right now, and selling is easy, so make the decision based on finding something you want to move to (or not).  

Good luck!

[purplepenguin7]

You've probably found my thread on the same topic..but just to echo Susie, before you even decicde to sell you should check out and monitor activity in your area and see what a house you would love would go for. Sure, you can sell high right now but buying a clusterfuck. In my 10 month (really longer) house experience people are selling crap out for very high prices because there are desperate buyers. Throwing out some basic numbers your house might be worth 500k now, but a more updated/finished is going to be listed at say 700k with 10+ potential buyers driving it to who knows what. Also in my experience because there is so much crap on the market, the nice updated modern homes are bidded up expontentially because everyone wants them.  Also with a narrow search area of having to stay in the same school district you are even more limited. 

More to your question, I found bridge loans extremely hard to find. They get thrown around on here and other online forums a lot but all the lenders I reached out to were like no, we don't do that.

[dancingirl21]

Thanks. We spoke with our lender and are considering a temporary 401k loan. We live in a subdivision that has great houses but all original owners. The subdivision across the street is all young families and where a lot of my DS1’s friends live. We would almost look to make a lateral move. We could go up in price a bit but wouldn’t go much higher. It’s basically about the neighborhood. My DH is a GC so we can do some work.

[holly116]

Do you have enough equity to leave 20% in the existing home and put enough down on a new home? We did when we sold in 2020 so we did a cash out refi. We took all the equity, less 20%, and used that to put down 20% on our new home. It allowed us to jump as soon as the perfect home hit the market, move out, and then list our old home the next week. It sold in a day and all worked out. We have a bank around here that does $250 refi closing costs so the math made sense.

Good luck!

[dancingirl21]

Feb 7, 2022 17:56:09 GMT -5 holly116 said:

Do you have enough equity to leave 20% in the existing home and put enough down on a new home? We did when we sold in 2020 so we did a cash out refi. We took all the equity, less 20%, and used that to put down 20% on our new home. It allowed us to jump as soon as the perfect home hit the market, move out, and then list our old home the next week. It sold in a day and all worked out. We have a bank around here that does $250 refi closing costs so the math made sense.

Good luck!

That's a thought. It would be close, but we have enough in savings to come up with the additional after the refi. I'm not sure our lender would do the lower closing costs and I really want to work with them again. Our lender gave us some options today that might work, so we are getting him to write up a pre-approval letter and talking with him again this week to discuss best options. Thanks for the insight!