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Bridging the Gap: From Selling to Buying

Bridge loans when you need to sell to buy

Many buyers have a home to sell before they buy. That creates a natural dilemma, and Rick Renna, Sr. Loan Officer and VP with Blue Hills Bank in Concord, Massachusetts sat down with us to explain the range of options available! Can you get a bridge loan?


Here’s the transcript: 

I’m Jessica Packineau with the Lincoln Real Estate Team at Barrett Sotheby’s Realty. I’m here with Rick Renna Sr. Loan Officer and Vice President of Blue Hills Bank in the Concord office. Rick is going to help us understand a little bit about this dilemma that we have found some buyers in — especially with a listing we’ve got that’s wonderful! It’s had a ton of interest, but a lot of buyers are unable to make an offer because they have a home to sell. In years past, bridge loans were a common way to bridge the gap between the house you want to move into and the house you’re currently in. Rick is going to help us understand a little bit about what is available?

RR: Thank you, Jessica, I appreciate the introduction. It’s such an important part of today’s real estate market, and has been for a while. You’re right, bridge loans used to be something that were fairly available. But they’re also the riskiest type of loan. for any lender. And as a result, when the market turned, especially as dramatically as it did in 2008, It’s the first loan that goes away, and it’s very difficult for it to come back. However, this is not the kind of market (and hasn’t been for many years) where sellers are going to be willing to accept contingencies much less a sale of home contingency. But a lot of people don’t realize that it is something that’s available.

There are multiple ways to look at it.  I have always tried to look at the entire financial picture for a buyer in this type of situation so that they can first off, understand first off that it may be available. That will help them make offers that don’t require a contingency and also give them a better understanding of what it means to be in that position that isn’t risk free but not so risky that it is unfathomable. The way to do that is look at multiple options.  It’s not just the traditional bridge loan idea but it’s looking at the entire financial picture.  What does your asset portfolio look like? Are there other ways to capitalize on other things than making a loan against the the property you are purchasing?  Are there loans available that can be accessed for down payment funds in a short -term way that allow you to access funds tied up in the home that is being sold? To be able to access the down payment how do you qualify for that, first and foremost, and   How do you qualify for that and what is the best way to do it?  That takes the in -depth deep dive into one’s financial picture to make sure first that they qualify and what is the best way to do it? And so the key is getting in early to understand that and when you are done you first of all understand what’s available.  You have the ability to go in to make that offer without a sale of home contingency to put your best foot forward, knowing that the short -term situation is something that is doable and that you can tolerate.  Like anything else, when you plan for the worst -case scenario you significantly increase the likelihood of obtaining the best -case scenario.  Many people that I talk to start with the idea that, “Okay I can do this but it doesn’t feel comfortable but doing it I know I can move forward”. And low and behold by just getting to that step they are able to secure that home to buy, wind up selling their house in the interim, don’t even need what the interim piece is, or if they do it is for a very short time period.

JP: Great, great so it sounds like it possible for some buyers to make that offer without the contingency of selling their home and be able to leverage other assets that they make have when you take a broad picture of their whole financial picture.

RR: And it really comes down to three basic options:  One is the ability to purchase because they have some funds available for a smaller down payment than they would have wanted, so purchase with a smaller down payment. When you sell your home, you add equity to your new home and adjust the permanent financing.  Sometimes that is a combination of a first mortgage and a second mortgage on the house being purchased.  That allows you to pay off the second and keep the long-term financing in place.

Other times it is the ability to borrow from asset portfolio whether is in an investment account or even in a retirement account that by borrowing you don’t incur any tax or penalty obligation but you are able to access those funds on a short term basis that can then be paid off.

And then, despite the fact that bridge loans are pretty unavailable right now, Blue Hills Bank does offer a unique blanket loan program, very similar to bridge loans financing but with some very specific differences that make it unique and allow people to potentially qualify in ways that bridge loan financing wouldn’t allow. It also allows you to purchase in some cases with as much as 100% financing because the loan is based on the combination of the value of home being sold and the home being purchased.

JP: How interesting!

RR: With a Loan that is at a competitive rate, that when you sell the home being sold, and you apply the equity to the home being purchased the loan is then re amortized so you essentially wind up with the same long -term amount and long- term payment you would have wanted had your current home sold first.

JP: How cool.  That is so neat.

RR: There are those options available and that every situation is unique but the ability to look at one’s entire financial profile and say, “Okay here is the fall back of what you quality for, here are some other options.  Let’s look into, let’s talk to your financial planner and look into the ability to borrow against your asset account or find a way to keep it together.”  Every once in a while, family help can be a bridge for that blanket loan as well.  We will look at all those options.

JP: That’s great, well thank you so much Rick for helping us understand this really complex step for a lot of buyers.

 

We’ve already heard Rick discuss whether buyers should wait to buy, and up next we’ll talk about buying your first home while paying off student loan debt!

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