Did anyone else here ever have to take out (or know something about) a "bridge loan"?

[CTyankee]

We are elderly and have recently moved to a retirement village while our house was being readied for sale. The house was not fully paid for, but in anticipation of our move we started whatever needed to be done on the house and got it finished. The realtors are proven sellers of property in our section of New Haven and we were overjoyed to learn it was worth over twice what we paid for it.

My question is this: should we take out a "bridge loan" because we simply do not have the cash to support both while we await sale of our house?

Our new residence is giving us a full month before we start paying for the apartment. We are half way through the month now and we are getting nervous. Our real estate agents haven't suggested such a loan but I am wondering if we should just go ahead and apply for one.

It is not the ideal season for selling a house. However, we know nothing about real estate and must depend on folks who do.

We can't be the first to have such a predicament.

[Freddie]

1. My parents did

Back in the 90s when they bought a house (no steps for Mom) before they made settlement on the sale of their old house. They used a local bank and had no problem.

[Jersey Devil]

2. Tough call

As a lawyer who often handled real estate matters I always recommended that home owners take out an equity loan before putting up their house for sale so that they would have "bridge" money available if they needed it. If they didn't need it and never took a draw on it the cost would be virtually nothing. But banks are much more careful with bridge loans and often won't give them unless your current home is actually under contract for sale and has tons of equity. The problem with bridge loans is that they are for a set period of time and it puts pressure on you to lower your selling price to get everything over with as quickly as possible, where with an equity loan you can limit what you borrow by taking draws on your equity only when needed and for as long as you want.

[democratsruletheday]

4. Perfect post Jersey....

I'd highly recommend a home equity loan as well. Doesn't matter that there is a pending transaction. Matter of fact, no need to tell your bank or credit union about the sale as it's none of their business. Whatever amount you need and spend before you close the sale of your home will be subtracted out of the proceeds at closing. Home equity loans are flexible, affordable and convenient. Call today, they'll do an appraisal ASAP and you'll have the breathing room you want and need. Good luck.

[multigraincracker]

3. I did and it worked well for me.

Had a house for sell that was paid for. Found another that I wanted to pay cash and not take out a mortgage.
The one for sell sold faster than I thought it would. Saved me from a new mortgage and all that hassle. Was able to pay cash for the new house with the bridge loan.

[MineralMan]

5. I'd do that only if you absolutely have to.

There's always a risk involved, especially if you are counting on selling a house and lot. As you pointed out, this is not a hot season for home sales. Plus, due to the high interest rate on mortgages, many potential home buyers are thinking twice before buying.

That said, you need to consider how much extra you might have to pay to service the bridge loan. If, for some reason, your home doesn't sell in a short time, you could get in over your head.

Of course, a bridge loan also gives you some time to get a maximum price for your previous home.

I'd consult with the real estate company who is trying to sell your home. Ask for their frank and honest opinion on the sale. It's possible that you might have to lower your asking price enough to prompt a potential buyer to act and buy.

I guess I'm saying, "I don't know." I've sold two houses in my life, and have bought three. My strategy has been to sell the old house before committing to buying the next one. That can be inconvenient at times, but it has worked for me in both sales.

[LeftinOH]

6. I did. Sold my house in 2021..which was not fully paid off yet, and "bought"

another house. It was extremely helpful to have one single realtor handling both the sale of the old house as well as the purchase of the new one. The real estate company offered the bridge loan. The terms of the bridge loan were that I had 90 days to find a buyer for the old house, or face a penalty ..but I do not recall what the penalty would have been if the old house didn't sell within 90 days, because I was assured that it would sell.. which it did.

The downside is: As the seller, you are motivated to get the old house sold as soon as possible, even if an offer is less than you might have wanted to hold out for. The luxury of of having time to hold out for the highest bidder just isn't there. In my case, an interested buyer (offering a very nice price) took *way* too long in getting the full home inspection scheduled..which was required by their own home loan institution. My realtor finally declared that we should cancel the pending sale from our end (which were were entitled to do) because of the urgency that my bridge loan would soon be expiring. We had to settle for a lesser offer, but one that went through more quickly.

A good realtor - with the backing of a good realty company (mine was Howard Hanna) was very helpful, as this was all new to me.

[BruceWane]

7. Probably should strongly consider it if you're looking to get the most money out of it.

Even if you get a buyer today, it's most likely going to be about 30 days before the sale is completed. Quite a few things need to happen on the buyer's side in order for them to fully obtain their loan - property inspection, appraisal, loan underwriting, etc.

The only way your sale is going to close faster is if you get a buyer that is paying in cash outright.

It's also very common for a buyer to request an even longer period before closing because they are selling their current house and would prefer to minimize their own time where they're dealing with two house payments. It's not uncommon for a buyer to request a closing date that is 60 or 90 days out.

There's plenty of businesses that will offer fast closing at a significantly reduced price.