Most sellers need to sell their existing home before buying a new one. Home mortgages tend to be one of the largest monthly bills and not everyone can afford to pay more than one mortgage at time.
But what happens if you plan on moving out of your Oviedo real estate property and you happen to find your dream home before coming to contract on your homes for sale in Oviedo? This ties up your hands and seems to leave you with a choice:
- Let your dream home sit on the real estate market and hope it doesn’t sell.
- Move your Oviedo homes for sale quickly by lowering the price.
Neither one of these choices seems ideal, nor are they your only options.
Explore Bridge Loans
You’ll want to explore gap financing options, like a bridge loan. Also known as a swing or caveat loan, a bridge loan is a type of short-term financing option for home owners in exactly this type of predicament.
A short term loan like a swing loan can be taken out for as little as 14 days to about 3 years. It can serve in the interim to help temporarily bridge the gap between the sales price of new homes for sale in Oviedo or another location, and a buyer’s new mortgage.
A bridge loan is secured to the buyer’s existing home with the money made available to be used as a down payment on the new homes for sale in Oviedo.
Lender’s Perspective
Many lenders will consider issuing a bridge loan to buyers if they are in good standing on their existing first mortgages in their present homes for sale in Oviedo.
Mortgage lenders will be expecting the buyers to be closing on their new home purchases before they are able to sell their existing Oviedo real estate properties, and are anticipating buyers will own two homes for a short period of time.
Catch? Interest Rate
Interest on a bridge loan is paid up front for 6 months, relieving the buyer from having to make two house payments until their home sells.
When the old home sells, the loans principle balance and any accrued interest from the sale’s proceeds is then paid off.
Bridge loan interest rates tend to be higher than other loans. A bridge loan typically runs for 6 months, but they can extend up to 12 months, and as noted above, can be set for 3 years.
Risk With Dual Mortgage Loans
Of course, there is always a risk that your homes for sale in Oviedo don’t sell. You will then be stuck with two mortgages once the bridge loan expires.
But, if you are confident in the prospects of your homes for sale in Oviedo selling, a bridge loan allows you to wait for the best deal.
Other Loan Options
Because of the real estate market crash a few years back, lenders are much more cautious about handing out loans, like bridge loans. However, there are other lending options home buyers might be able to secure when faced with a “buyer want but need to sell” situation.
- Apply for a home equity loan
- Ask for a line of credit
- Take out a signature or unsecured personal loan
- Try to get a hard money loan
- Refinance your current home to access the equity
