Selling your current home before buying a new one is the conventional way to move. However, depending on your situation, there will be times when buying before you sell is the better option. Whatever your reason, you should know that buying first comes with additional risks, such as paying two mortgages, if your current home takes a long time to sell.
If you’re in a situation where you must buy first before selling, don’t worry. It’s not impossible, but it takes some strategic planning to make it happen. Here are three things that will help you buy before you sell:
1. Use a home equity line of credit. A home equity line of credit, or HELOC, is a second mortgage that allows you to borrow cash based on the value of your home. In other words, it allows you to use your equity without selling your home. While lenders vary on how much they’ll let you borrow, 85% of your equity is industry standard. If you choose this option, you’ll need to act fast. Getting approved for a HELOC often takes longer than a traditional mortgage approval, so you should have it in place before applying for the mortgage on your new home. Once you have moved into your new property, you can put your old one up for sale at your leisure and pay back your HELOC using the profits.
2. Finance with a bridge loan. A bridge loan is a short-term, high-interest loan. When you buy with a bridge loan, you can use your existing home as collateral to get a loan for your new house. To close your bridge loan faster, try to align the closing dates of your buying and selling transactions.
3. Use a service that will help you make a cash offer. Companies like Knock and Homeward are revolutionizing the way people buy and sell homes. These types of companies offer game-changing home loan products that let you make competitive cash offers on your dream home before the sale of your current one and help you avoid paying two mortgages simultaneously.
Buying a new home before selling your existing one has its unique challenges, but if you can leverage the three options above and utilize the guidance of an experienced agent, you can come up with the best solutions for your situation. If you want more details about this topic or have any real estate concerns, don’t hesitate to call or email me. I’ll be happy to help.
