Buying and selling a home at the same time is challenging for a variety of reasons. Often, homeowners need their home to sell to have enough money available for the down payment on a new home. A bridge loan is helpful if you can’t wait for your home to sell in order to purchase a new home. Let’s dive into the details.
What is a Bridge Loan?
In real estate, a bridge loan is a short-term loan that allows buyers to borrow a portion of equity in the property they already own. For most homeowners, this means borrowing existing home equity to use as a down payment on a new house. The bridge loan also helps improve immediate cash flow to cover other expenses and financial obligations. Similar to a home equity loan or a mortgage, bridge loans are secured with your current home as collateral.
When securing a bridge loan, you do have to meet certain criteria to qualify since these loans are considered higher risk. Lenders look for a low debt-to-income ratio, a good credit history, and considerable equity in your current home. As a result, a bridge loan may be out of reach for some homeowners.
Windermere Bridge Loan Benefits
Windermere offers an exclusive bridge loan program for clients to help with financing a new home while their current home is still for sale. The bridge loan gives you the confidence to move forward by providing upfront funding using the equity from your current home so that you can make a non-contingent offer on a new one. Windermere’s Bridge Loan program gives you a stronger negotiating position and eases the pressure of having to sell before you buy.
Being able to make a non-contingent offer allows you to be a competitive buyer in a tight housing market. You don’t want to lose the new house of your dreams because you’re waiting for your current home to sell. A non-contingent offer is more attractive to sellers because they don’t have to wait for your home to sell first before closing the deal.
Windermere Poulsbo’s Branch Manager, Julie Bray-Larsen, recognizes the advantages of the Windermere Bridge Loan. In fact, she used the program for her personal home purchase. “The Windermere Bridge Loan allows buyers to compete in a competitive market. With an approved bridge loan, the buyer becomes a cash buyer without a finance contingency and has no monthly payments for 6 months or until they sell the collateral property. There is no appraisal involved on the property being purchased, and the entire process is seamless!”
Windermere Bridge Loan Process
When determining the bridge loan, Windermere looks at the amount you owe on your home, plus the bridge loan. These two loans combined cannot be more than 75 percent of the value of your current home. This helps determine the qualifying bridge loan amount. The approval process for a Windermere Bridge Loan only takes a few days.
No payments are necessary on the loan before your home closes unless you choose to make a payment. The loan fee is just one percent of the loan amount, due upon disbursement of the loan. The principal and interest are due when your current home sells or six months following disbursement, whichever comes first.
What about Interest Rates?
Don’t let higher-than-average interest rates stop you from moving forward with buying a new home. Bridge loans are short-term loans with higher interest rates than regular loans, regardless of what’s happening in the broader economy. This downside is outweighed by the ability to buy the house you want by making a competitive offer.
Additionally, although the current interest rates average 6.75% for a 30-year fixed mortgage in Washington state, real estate experts often say you marry the home, but date the rate. You can always refinance when the rates go down.
Taking the Next Step
If you want to learn more about the Windermere Bridge Loan program, please contact a Windermere Poulsbo real estate agent. They will be happy to answer any questions you have.