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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.

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