Do You Need a Bridge Loan?
After renting for so many years the place you lived in, you are seriously thinking of buying a house. So you searched a property with a real estate agent and find the perfect "move-up" home. You like, your wife like it and your potential kids will love it too for sure. So you made your offer to the seller. The only problem is that you need to sell your house in order to buy that house. The real issue is that you have not even put your house on the market yet. Without being listed, you will find it hard to sell quickly your house.
In order to solve this situation and ensure that you can still have the house of your dream, you can make a contingent offer. Your offer to buy is contingent upon your ability to sell your house in time to close. However since you have not even listed your house yet, most sellers nowadays will turn you down considering that's a little bit too contingent for them preferring a buyer who can buy the house right now.
With hindsight, you now realize you should have listed your house first, got an offer and accepted it. It is only after completing all these step that you could have gone out looking for a new home. However it is too late now and you really do want to let this house for someone else.
Your real estate agent may then suggest you get a bridge loan. If you have enough equity in your present home, this is a special loan that allows you to get some cash so you can make a down payment and buy the new home. Interest rates are high, points are high, and there are costs and fees involved.
Using a bridge loan is really the last option to use. It is cheaper to directly borrow from your 401K if you have enough equity in it. Lenders allow that as a source of funds for down payment. Any secured loan is an acceptable source of funds for a down payment. If you have stocks or bonds or an insurance policy, you can borrow against that, too. Even a car can be used. Any loan "secured" by a physical or financial asset. Eventually, it is almost much cheaper to use the home equity line. If you have enough equity and can qualify for a bridge loan, you can also qualify for a home equity line. Generally, it will cost only about $350 at any local bank. You just should get the loan before you list your property for sale.
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