Did you just get some exciting news from your company or family member to relocate, but you’re feeling otherwise because you don’t have the funds to do so as soon as possible? We absolutely understand that feeling. You get so worked up and excited, and the next minute you drown with worry because you feel like you can’t sell your Perry home and relocate that fast.
Well, you’d be glad to know that you can buy your next home and sell your house fast, even for cash! You have two options for this. One is by getting a bridge loan or sell your current home to a professional home buying company. If you don’t want to hasten leaving your current home, but still want to prepare your next home already, you can explore bridge loans. And to start your research, here are some of the pros and cons of getting a bridge loan:
How Does a Bridge Loan Work?
Simply put, a bridge loan is a short-term loan used to buy another property while you are waiting to find a permanent, long-term mortgage loan. Bridge loans usually run from 6-12 months, and uses the equity of your current home as leverage. This means that banks will less likely approve a bridge loan if your current home is just starting to build equity. And yes, even if you’re still paying mortgage on your current home, you can already apply for a bridge loan.
To calculate your principal bridge loan, the bank will consider the value of your new property, your existing mortgage, and the possible sale price of your current home. You cannot apply for a bridge loan unless you are seriously considering selling your current home.
There are also things you need to consider to see whether a bridge loan is right for you or not. Here are some of them:
Pros of a Bridge Loan
One of the advantages of a bridge loan is that once you come across a house you like, you don’t have to wait for the market to be “friendlier” for you to buy it. A bridge loans gives people the opportunity to buy the house they want, as soon as they want it. Other advantages include:
- Be Able to Relocate Right Away
For many people, budget is a huge obstacle for them to relocate right away. Apart from thinking about the money to buy or rent the next house, you have to think about moving costs which can go up to $2000 if you hire an Atlanta-based moving company. However, if you get a bridge loan, you only have to worry about the moving expenses.
- Less Pressure on Selling Your Current Property Right Away
If your bridge term is 12 months, then you have 12 months to sell your current home. This is advantageous for sellers because it’s not all time that houses are sold the day after you list them. In many cases, it would take months to sell a house especially when the offer price is not right, or potential buyers back out at the last minute.
- Frozen Repayment
In a bridging loan, borrowers don’t have to repay it until the current home is sold. This means that you don’t have to worry about two home loans, considering you’re still paying mortgage on your current home.
- Save on Moving Costs
Getting a temporary residence will double your moving costs. The first is from your current home to your temporary residence and the second is from your temporary residence to your permanent home. In addition, temporary storage facilities can be costly wherever you are in the state.
- Flexible Payment Terms
Unlike regular home mortgages where bankers charge a prepayment penalty, bridge loans allow borrowers to pay in advance without a heavy fee. With a bridge loan, you have the option to repay the lender in advance to reduce your interest.
Cons of a Bridge Loan
If you aren’t able to sell your current home on time, your bridge loan lender may have the right to sell your property at the price they want since your current property also serves as collateral. And this isn’t the only disadvantage of a bridge loan.
If your property isn’t sold on time, your loan interest will accrue. The longer it takes to sell your property, the larger your interest will be. And the increase is monthly.
- Pay Appraisal and Valuation Fees for Both Properties
Since your bridge loan lender will consider the value of your new property and the possible sale price of your current home, both your old and new property will be re-appraised. And this comes with corresponding appraisal fees that you’ll need to pay upfront.
- Inability to Redraw
Once you’ve signed your bridge loan papers, modifying the loan terms will already be difficult. So before you sign, make sure that all the terms are suitable for you and you can commit to them.
If you’re having second thoughts about going for a bridge loan, you can explore the second option and that is to sell your Perry home to a professional home buying company. You can use the profits to finance your new home and you don’t have to worry about repaying another home loan after that. Talk to us at Spire Property Solutions and we’ll help you find the best solution for your real estate concerns. We are available at (678) 318 – 1801.