Posted by Dawn Griffin
How To Buy a Home Using the Equity in Your Current Home
Common Scenario
Your house is feeling a little too small. It’s actually feeling A LOT too small. When you bought it, there was just you or just the two of you. But now? Well now, there’s you plus three small humans, a canine, two guinea pigs, and a fish.
While you have a great job and good credit, you are low on cash because you spent the last 8 years paying off student debt. You don’t have a down payment for the new house. However, there’s a lot of equity in your current home. You bought during the recession at a great price and neighborhood values have been steadily improving.
How do you access your equity without first selling your current home? Moving twice is not an option, because (as aforementioned) three small humans, one canine, two guinea pigs, a fish and a pretty demanding work life will not allow a routine break of that magnitude.
The Bridge Loan
A bridge loan is secured by the equity in your existing home. A bridge loan allows you to access up to 85% of the total value of the home you are selling. For example, let’s say your current home is worth $300,000 and you owe $150,000. The bridge loan would allow you to pull out the remaining $105,000 in equity for the down payment on your new home.
[($300,000 x .85) – $150,000 = $105,000]
Yay! This allows you to write a competitive offer, not contingent on the sale of your current home. You only move one time and you have purchased the new home with a permanent mortgage. This means you do not have to refinance down the road and incur additional closing costs or risk an interest rate jump.
On top of that, you selected the right Realtor to help with the sale of your existing home so it will sell in a hot minute and you won’t have to worry about carrying double payments for an extended time.
Your Next Steps
- Call us today. We will help you analyze the data for your current home which will give you a rough idea of how much equity there is for the down payment on your new home.
- Speaking with a lender is imperative.
- Set up an agent only MLS portal with our dedicated buyer’s agent so that you can start looking for your new home!
- Schedule the staging consultation so we can help you prepare your home for sale!
