Planning a Move? How to Buy a House Before Selling Yours

Written By: Kelly Jaunet Jones

Are you...

• Dreaming of a new house but want to know the logistics of selling yours?
• Feeling rushed to sell to get the house you want?
• Would you rather use your equity than your savings?

You're not alone. Many homeowners with significant equity in their homes also face this dilemma. The good news is that there's a solution that can make your transition smoother: a bridge loan.

We understand the challenges of buying and selling. We help people through this process every day, so we offer solutions to help you navigate it. Let's start with the basics.

What is a Bridge Loan?

A Bridge Loan takes the equity you have in your current home to pay for all or some of the purchase of a new home.

How Does It Work?

1. The Bridge Loan pays off your current mortgage.
2. You are able to use the Bridge Loan Funds to pay for the new house.
3. You have six months to sell your current house.
4. You make bridge loan payments each month until it is sold.

How Do I Know If My Situation is a Good Fit?

Not sure if a bridge loan is the right choice for you? Here is a calculation that can help you make your decision: What you owe + How much you want / Current value of your home. If it is 80% or lower, it might be a good option for you.

What are the Benefits of a Bridge Loan?

• Flexibility: Buying a new home before selling your current one allows you to move at your own pace.
• Avoiding Temporary Housing: You won't need to find temporary housing between selling your old home and buying a new one.
• Market Timing: You can take advantage of favorable market conditions for buying and selling.

How Does the Real Estate Market Have an Influence?

Seller's Market

If it's a seller's market, your current home will likely sell quickly. This will  reduce the time you'll need the bridge loan, so be sure to keep that in mind.

Buyer's Market

 In a buyer's market, buying before you sell can give you an edge in negotiating your new home purchase. This kind of market has a wider variety of homes to choose from in your decision-making.

What Are Some Risks to Keep in Mind?

Financial Planning

Work with your lender to understand the bridge loan terms and ensure you can manage the payments. Having a personal guide to help you could help ease any worries you have during the process.

Contingency Plans

It's always a good idea to have a contingency plan to account for any unexpected challenges that might arise as you're purchasing your new home. For example, if your current home takes longer to sell than expected, it would be beneficial to have an alternate plan for how to move forward in your homebuying journey.

Professional Guidance

While you might have some experience with real estate, having a professional on your side can provide you with the assurance you need to take the right steps. They can help you price and market your current home effectively.

Purchase Your House with the Help of Leaders Credit Union