Has anyone used a HELOC or a bridge loan to finance a downpayment on a new property while trying to sell an existing one? Pros/cons/experiences or good resources to look at (that don't involve talking to a loan officer, we're already doing that). I don't know anything about these options and trying to educate myself beyond what the finance folks tell me. Long story short, we have a condo we are trying to sell and we need to sell it in order to buy another property (down payment/can't carry 2 mortgages). However, we're in a hyper-competitive market so our realtor suggested these options. I know zero about them, and an initial Google scan says not the best idea, but I really want to be smart about it all so would love any input folks have. I'm also weary because we tried to sell our place last year and it sat on the market for 4 months. The new realtor seems super confident we can sell it fast, but I'm a natural skeptic. Thanks!
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We did use a HELOC for this purpose. It was fairly cheap as loans go, however an important factor for us was that we owned the house we were selling free and clear, so we were not at risk of juggling two mortgages AND a HELOC.
We were also seemingly in a great position with realtors competing to list our house, etc., because it was in a great school district. We even had a bidding war when we first listed. Then the winning bidder found a (supposed) massive issue on inspection, which we don't actually think was real, just a function of the way older houses are structured, but long story short she backed out and we were left in a really shitty position. It took us close to a year after that to sell it, and we had to sink money into structural fixes that we didn't really think were necessary. And, we sold it for a fair amount less than our original offer. Fortunately it still easily paid off the HELOC and paid back what we had spent. But, long story short, if you don't feel you can float the HELOC on top of your other expenses for at least a year, plus factoring in possible additional surprise expenses, I would not do it. I'm a natural skeptic too based on my experience
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We did this. We had a mortgage on our old house, took out a heloc and got a mortgage on the new house. We actually had to have my parents co-sign on the new house because I wasn’t working at the time so we wouldn’t have been able to qualify for two mortgages on just one income. We waited 90 days and refinanced to get them off the loan (no cost to us and the payment basically stayed the same). Our house sold quickly so we didn’t have to worry about two mortgage payments and the heloc.
It was sort of a hassle to juggle everything but it worked out well.
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We were in the same situation: had to sell in order to buy in an insanely competitive market.
We listed our home and asked for a free rent-back. We got multiple offers over asking with 30 and 60 day free rent-backs. We ended up choosing an offer with a free 30-day rent-back and put an offer on a home the next weekend. The timing ended up being super easy. Would this possibly be an option for you?
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For those of you that have done this, what were the rates like on the HELOC and how long did you have to have it (like how long between getting and selling your old place and paying off the HELOC?).
We are kind of in this position. We're always kind of looking for a bigger place, but my husband is insanely, insanely picky (truthfully, he doesn't really want to move at all so it has to be the PERFECT place for him to want to move, and frankly, in our budget the perfect place doesn't really exist. We're going to have to make some small concessions). We have maybe just enough cash to make a 20% down payment with just taking money out of savings, but that depends on the purchase price. We've seen some 2 family houses (well, like 1 family with a small basement level rental) that are over our budget but would be okay with that rental income. For that scenario, we don't have enough sitting around in cash for a 20% down payment. So we'd have to either 1)sell our place first 2) take out some kind of HELOC loan 3) borrow from retirement funds temporarily. But then, what if our place doesn't sell right away? This wouldn't have been an issue a year ago, but the market has slowed down this summer, so now it seems so much more risky. And my husband is extremely risk-adverse. Extremely. So we're kind of stuck.
Once we sell our place, it's all fine. We're close to paying it off, so we can make a 50-70% down payment on whatever we buy next But it's the in-between time that seems scary. Doing a rent-back situation is common enough in our area, but I'm afraid we wouldn't even find what we're looking for in a 30-60 day period. There have only been 1-2 places on the market this entire year that tick all of our boxes. We could just sell and rent for a year, but then we might get ourselves in a lease and then find the perfect place. Plus, that's a lot of moving when we both work and have 2 kids.
My husband is lobbying to just stay put until this place is fully paid off (maybe another year or two, depending on what his bonus is like), but I feel like we've outgrown our space. I need another bedroom, and I need more storage. I do love our neighborhood though and wouldn't mind staying here for the foreseeable future. I just wish we could find exactly what we wanted for under 1.3 mil if it's a condo or under 1.7 mil if it's a brownstone with a basement unit...and basically all those are few and far between, unless we move to a different neighborhood. Boooo. It's tough. We've been kind of looking but stuck in this no-man's-land for the past year.
I honestly would prefer to stay in my exact building, in my exact unit, and like.....buy one of the adjacent apartments and convert our place into a bigger place. But I can't see any of our neighbors moving any time soon--they are both child-free couples who have been here longer than us.
Maybe we should meet with a loan officer to run the numbers on all the scenarios. It just seems like any scenario requires quite a bit of risk of carrying 2 mortgages or a mortgage and a rental at the same time.
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@Anagram: we live in the same place. Send an email to Baret Kechian at Loan Depot. He is FANTASTIC. Very responsive, knows our market well, and goes above and beyond. We've had a few hiccups with our home purchase (we hope to close by the end of the summer) and he has made problems literally disappear. He has worked with a few of my friends too and they all have glowing reviews of him. My husband is in finance and thought he had our financing all figured out, and Baret walked him through options and presented some stuff we hadn't considered (and we ultimately went with).
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@Mrs. Carrot: We did a bridge loan. I'm surprised how many people do HELOCs because most applications specifically forbid it's use for down payment on a new house. Interest rate... not sure because we didn't end up having to actually ever make a payment on the loan because we sold and closed on our other house within a few weeks. We closed on the bridge on April 1st and sold on April 28th. BUT the payment wouldn't have been due until June 1 anyway, so we had time to sell it. The only cost to the bridge loan was pre-paid interest, which in our case was basically the same as our old mortgage payment so the loan essentially felt free. If you have them there, we used First Republic Bank and they were fantastic.
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Thanks for everyone's input. We got lucky and got a great offer on our condo (ironically - it sat on the market for 4 months last year and this time we got 2 offers in less than 72 hours on the market), and went under contract on a house on Monday so the loan point is moot for us, but the more I dug around into it the less I liked the idea of carrying debt for something like this in case we ended up in a long sale scenario again.
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@Mrs. Carrot: congratulations!
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@Anagram: I can’t remember what our rate was but we only had the heloc for maybe 30 days. We listed our house and had multiple offers within 3 days. We did have to pay an early closure fee on our heloc but it was worth it to be able to get into the new house. We just wouldn’t have been able to do it otherwise.
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@Mrs. Carrot: congrats!!!
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