Obtaining financing while owning a home can be tricky; however, there are some options to consider. Buyers have several options when balancing the sale and purchase of a home and understanding those options are important.
Open a Home Equity Line
Tapping the equity in a currently owned home can be a fast and inexpensive way to gather the funds needed for a new purchase.
HELOC benefits can include:
Interest only payments for the amount borrowed. Competitive HELOC rates with good credit. Nominal fee (sometimes free) to open the line. Typically no penalty for closing a line early when the property is sold.
Buyers will need to qualify for a new mortgage with the total debt of the existing mortgages and proposed mortgage payment.
Borrowing from a 401K
Borrowing a down payment from a 401k can be a great way to obtain financing; however,it is suggested buyers speak with a financial expert and HR representative about the advantages and disadvantages of self-financed down payments.
Apply for a Bridge Loan
Bridge loans bridge the gap between the current home and the purchase of a new home. The loan allows home buyers to tap equity for use as a down payment.
Some bridge loan facts:
The cost for a bridge financing is more expensive than a line of credit. Applicants must qualify for both mortgages. Payments may not be required for several months; however, interest will continue to accrue.
Lending guidelines will vary from lender to lender and a mortgage professional should be consulted to guide you.