A Creative Way to Buy Your Home Before You Sell
You’re ready to buy a new home. However, you’re counting on proceeds from selling your current home to fund your down payment. So, what happens if you find your dream home before you sell? A Bridge Loan could give you the funds you need for a down payment without waiting for your home to sell.
The "Bridge" to Your New Home
A Bridge Loan is useful in many situations when you can’t or don’t want to sell your home first. “It gives buyers the ability to do things on their own timeline,” explains Jennifer Warmerdam, Vice President Home Loans at Golden 1 Credit Union.
Here are a few specific examples:
- You don’t want the stress of trying to simultaneously sell one home and purchase another.
- You want to move out before staging your current home, have showings and holding open houses.
- You want to be able to make an offer quickly when you find your dream home, without making the offer contingent on selling your current home.
“We have a member who did not want to wait for their current home to sell before starting renovations on the new home,” says Warmerdam. “So, they are using a Golden 1 Bridge Loan for a down payment while also using some of the funds for remodeling their new home.”
How Bridge Loans Work
Traditional Bridge Loans are short-term financing solutions designed for one specific use: To bridge the funding gap between selling your home and having a down payment for a new home.
Golden 1 takes an innovative approach by using the Equity My WaySM Line of Credit1 to fund Bridge Loans, explains Warmerdam. This lets you tap into your current home’s equity (the value of your home minus your mortgage balance) to borrow what you need for your down payment, when you need it, up to your credit limit. And during the draw period, you pay interest only on what you borrow, not the full line of credit. Once you sell your current home, you pay off the Bridge Loan.
“The product is versatile and dynamic,” says Warmerdam. “A Bridge Loan gives a buyer flexibility by allowing them to sell their current home when it is convenient and best fits their financial situation."
Get a Free Pre-Qualification
As with a mortgage, it’s a good idea to get prequalified for a Bridge Loan before you start home shopping. That way, you have the funds you need when you find the home you want. A Bridge Loan and the new mortgage must typically be funded with the same lender. Similarly, Golden 1 offers Bridge Loans in connection with the new mortgage.2
“We can qualify a member for a Bridge Loan and a new home purchase at the same time and close them simultaneously,” says Warmerdam. “It’s a one-stop shop.”
Once you have an offer accepted on a new home, you’ll close on both loans and can draw funds from your Bridge Loan for your down payment. Be aware that there are closing fees associated with the Bridge Loan. Ask your lender for complete details.3
After closing, you’ll start making payments on the new mortgage and the Bridge Loan. With the Equity My WaySM Line of Credit Bridge Loan, you’ll have the option to initially make lower, interest-only payments, notes Warmerdam.
When you close on the sale of your old home, you can use those proceeds to pay off what you borrowed for the Bridge Loan, explains Warmerdam. Then you’ll close the line of credit, since it’s tied to the home you’ve just sold.
A traditional Bridge Loan is only used for short-term financing, while a Golden 1 Equity My WaySM Bridge Loan is a long-term financing solution. It relieves the pressure of needing to make a quick home sale if your circumstances change. If you need to retain your current home instead of selling it, the Golden 1 Bridge Loan lets you do that without worrying about needing to secure new long-term financing.
“A buyer can get into their new home, get settled, and then deal with selling on their own timetable,” says Warmerdam. If you opt not to sell, you can use your line of credit for nearly anything. Plus, you’ll have 15 years after the draw period ends to repay what you borrow, as long as you own that home.
Learn More or Get Started
A Bridge Loan can be a great solution to funding your down payment without the stress of selling your home first. Funding it with a Golden 1 Equity My WaySM Line of Credit gives you even more financial flexibility. To learn more, talk with a Golden 1 Home Loan Advisor. You can find one nearby with our online directory or call 1 (800) 971-9000.
1 All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. Borrower will be responsible for any closing costs associated with the Equity Bridge Loan, including an appraisal when one is required. Your maximum loan amount is calculated using the combined loan-to-value of your existing first mortgage and new second mortgage according to current guidelines. The annual percentage rate (APR) will vary and will never be less than 4.00% for owner-occupied properties and 5.50% for non-owner-occupied properties. The maximum APR is 18% for owner-occupied properties and 19% for non-owner-occupied properties.
2 A Golden 1 Bridge Loan can be added when Golden 1 is providing the financing for the purchase loan.
3 The borrower is responsible for any closing costs associated with the Equity My Way Bridge Loan, including the appraisal when one is required.