While the market here in Naperville, and our neighborhood, is a lot better than much of the country, we have some urgency in buying a new house in the Kansas City area. Primarily the school my daughter will be in (probably a repeat of 10th grade due to her sucky study habits/newly diagnosed ADD) starts August 15th, and we need her to meet before it starts with counselors, etc.
However, we’d have to sell our current house extremely quickly - like, this weekend or so - to have the money for a down payment to buy a house in KC that quickly (we need to be moved in by the end of July at the latest, so we need to be looking and buying in the next couple/three weeks.)
While our realtor and others feel confident we’ll sell our house in the next 90 days or less, that’s not fast enough. So someone mentioned that we could get a bridge loan which would essentially give us the down payment on the new house, then we could pay that off in the next couple of months or so when we sell our current home. It would also take a lot of stress off of us feeling like we’re trying to beat a very short clock.
So - anyone out there with any experience with bridge loans? What’s the best approach?
Honestly - I wouldn’t do it. It’s just not worth the hassle. If you must be there by the end of July and your house hasn’t sold, rent a place for a month or two. Then stick with the original plan of making an offer to buy contingent on your current home selling.
Jeff - Is this is ‘corporate move’?
I think when my parents moved to Chicagoland in 83 (talk about interest rates!) they got a bridge loan to cover the down payment of the house. The bridge loan may have been subsidized / recommended by / underwritten by the company my father worked for. So, I’d mention it to your relocation representative. They may have some suggestions.
Bridge loans are pretty standard, Jeff, and nothing to worry about, provided you can make the payments on both houses in the meantime and the payments on the bridge loan (if applicable – some bridge loans have no payments, just accumulate interest).
If you’re confident your old house will sell in the relatively near future (90 days is relatively near future!), I wouldn’t sweat it at all. If you think it’ll be on the market for 6 months, then you have some serious concerns.
Renting an apt. for a few months until the house sells is the safe way to play it – and in fact might be a good idea anyway just so that you can get to know KC a little better and find a place you want to live.
Yeah, the problem is that they start school very early in the new place - August 15th - which means if we want to buy a house and be moved in a couple of weeks before school starts, we just about have to be purchasing now. While our house is in a neighborhood that all the realtors say is a very desirable neighborhood, and houses don’t go on sell in this neighborhood often, and we’re supposedly priced well, it still is a little slow and it’s unrealistic to count on selling the house in the next 3 weeks or so. For example, this is a slow weekend, we had some people come look earlier in the weekend but nothing really today (though we were told on Fathers Day it would be very slow.) Everyone says 90 days max is what we should expect.
The issue with renting is partially finding a decent place that will rent month to month - most decent places want a lease for 6 months - 1year. And the cost of renting is not a lot different from a mortgage - less, but no deductibility/investment and not much advantage in terms of having two house payments until we sell. And I suppose the other part is my wife and kids just want to be “moved” and get life going again. But perhaps that is the least complicated, if we can find a decent furnished place that will rent month to month.
I’ll check in and see if the company will subsidize or help in any way on a bridge loan. We just need the money for the down payment until we sell our house.
We looked into this when we were selling/buying a couple of years ago, just in case the old house didn’t sell in time. It ended up being better to get a home equity loan on the old house, rather than a bridge loan. The rates are much better. Its also really flexible, since you have the money just sitting there, and you can just write a check if the sale doesn’t come through in time. We used our (old house) mortgage company for the home equity, as the fees were very low that way.
This is totally true and I should have mentioned this – assuming you have equity in the existing house, get a home equity loan with no prepayment penalty and you’re good to go. You’ll only be paying interest on it for 2-3 months max anyway.
Actually we would have considered a home equity loan, but we already have one on our current home that we used to pay off some home improvments, a high interest credit card we’d foolishly allowed to build up, and a used car (we didn’t expect to move this quickly, and in any case when we pay it off when we sell the house it will still have been a good deal, we got a very low rate and the interest is deductible.) We’ll still get about $70-80K on the home after paying off the homeequity loan, so that’s what we had planned on using for the down payment.
The rental approach seems like a low risk approach, but finding a 3 bedroom furnished place that will let us bring our two dogs, and is willing to do a month to month rental, in the smallish suburb in which we’re moving, may be a challenge.
I’ve contacted our company relocation person to see if they underwrite or help with bridge loans. I’m still a little hazy on how these works - how much they lend and on what basis, what it will cost me out of pocket, what the risks are, etc.
Just to add on to this, every place I have ever rented from (many, but limited to NV and CA) includes a clause in the lease agreement to break the lease amicably. The ones I have had basically required me to pay a month’s rent penalty but with otherwise no problems. It may be worth it for you to find a place to rent that includes a “one month penalty” clause to break a 6-month lease early. It’s not as good as month-to-month without a lease, sure, but you appear to be reaching the end of your options.
Update, fwiw. My mother, who loves to “help”, bless her heart, told me we should see if people would be willing to lease their house to us until our house sold. That way we’d be in the home in time, not have to stress about selling the house in such a short time, etc. I gently told her that the odds of someone living in their home and selling it being willing to lease the house to us and wait until our house sold (some reasonable time, say 3 - 6 months) would be extremely low, since, like us, they would need the closing cash to buy a new place for themselves.
So - our realtor in the KC area called yesterday, day after my Mom made her suggestion, and said that the people who owned one of the two homes that were top on our list asked if we would be interested in a lease deal, in which we payed some agreed upon lease amount each month, after we had settled on a buying price for the home, some part of which would go towards the down payment so it wouldn’t be just out the door like rent would be. Set a limit on the lease time, such as 6 months, after which we either closed or lost earnest money, with the option to close as soon as our house sells. Turns out this family has already purchased another home (they have horses and need to move out to the country.) Of course, we’d still have to figure out how to pay the lease and the mortgage here on our current home until it sold, but we’d have the same problem if we rented (and we have to move in July.)
So I called my Mom and got a big “Told you so!” LOL!