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The Guide On Buying A Home Before Selling Uncategorized

Having to buy a house before selling is not ideal, however, this situation is quite common. The real estate market is volatile and is hard to predict.

House sales are never guaranteed and many need to sell their existing home before they qualify for a new mortgage.

Bridging loans are one short-term finance option that can help.

Let’s Look At Bridging Loans

A bridging loan also known as a bridge loan in the USA is a short-term mainly property loan. It is useful to bridge the gap between buying a property and selling an existing one.

It is for people or businesses wanting a loan no longer than 12 months in length. In comparison to a home mortgage bridging loans are well suited when money is required fast.

Visit this page to Learn more about bridging loans to buy a house before selling your existing home

Common Reasons for Using a Bridging Loan to Buy a House

There are several reasons an individual might want to:

Downsizing 

Downsizing property can be a great solution for reducing or getting rid of a mortgage, cutting down bills and finding a home suited to changing needs.

A bridging loan can help buy a smaller home before moving into it, providing time to prepare for the move, and sort through possessions etc ultimately making for a less stressful move.

Retirement 

Buying a home for the purpose of retirement usually involves downsizing and typically involves similar issues.

However, there is often the added complication of needing to adapt the house to changing needs including the installation of a stairlift for example.

Bridging loans enable buyers to purchase a new home and make any necessary changes before moving in.

Buying at Auction

It is likely a bridging loan will be required for buying a new property at auction.

The reason for this is that buyers usually only have 28 days to complete an auction purchase or the buyer faces losing the property and deposit.

This time frame is usually not enough to arrange a mortgage, so bridging finance which can be accessed much quicker is often the solution.

Property Renovation

Lenders will rarely approve mortgages on renovation projects, especially if the property lacks a functional kitchen or bathroom.

Those looking to buy cheap property as a renovation project will often have to seek short term finance options.

Loans will enable buyers to renovate the property before moving into the property as a home.

How to Purchase A New Home While Selling Your Existing Property 

Securing a bridge loan allows buyers to present a cash offer. It allows sellers to sell and move on fast.

As far as bridging loans go, this type of deal is the least risky and there are far fewer roadblocks.

It is worth noting that many lenders are hesitant to release loans when the borrower cannot prove they have liquid assets to pay.

Bridging loans typically come with high-interest rates monthly. You should always seek professional financial advice before pursuing a risky loan such as this.

Advantages Of Offering Cash For Homes.

  • Favourable. Cash offers are acceptable most often instead of contingent and mortgage pre-approved offers.
  • Possible Discount. There is potential 2-5% discount with an all-cash offer. 
  • Less paperwork, uncertainty and delays. Lowers costs. Presenting cash lowers closing costs, there is no appraisal cost and no mortgage origination fees. 

Ultimately presenting a cash offer, places the buyer in a stronger position. Bridging loans can be a great way of generating this cash and is easier than most people think.

Securing the cash can help buyers produce an offer no one will refuse.

Advantages of Buying a House Before Selling

  • Seller’s at the advantage. It is a so-called seller’s market; demand is driven up because there are fewer houses to choose from on the market.
  • Fantastic deals do not wait for you. Sometimes the deal is too good to miss. ‘Deals’ in real estate are not that common.
  • It is your perfect home. Sometimes the dream home comes along and you can’t let it pass you by and hope to sell the existing home quickly.

Disadvantages of Buying a House Before Selling 

  • Pressure! The process is selling and buying property is stressful at the best of times. Buying a home before the selling another is whole other complication. 
  • Expense. Fundamentally it is all about money and taking out any form of loan is an expense and comes with a financial risk. 
  • Interest Rates. Risky short-term financial products like bridging loans generally involve higher interest rates, those considering this type of finance should make sure they have sought financial advice beforehand. 

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