Bridge Loans

[BrianD]

My wife and I are looking to build a house in just over a year. We would be looking to start construction in May which happens to be the best time to put a house up for sale. We have two options for how to handle this transition, but I'm hoping someone that has been through this can offer some advice.

One of our options is to get a bridge loan next May to use for construction, and try to sell our current house so that we are ready for an August move-in date. The other option is to sell our current house now and rent an apartment for a year.

The bridge loan route could be more expensive with the higher interest rates, but it avoids the hassle of moving twice and dealing with apartment life. Other factors worthy of mention, we have owned the current house for about 5 years so mortgage payments are still mostly going toward interest, and we would be moving about 35 miles closer to our jobs so there would be less money spent in gas.

Thoughts?

[MrBigglesworth]

The housing market could be tanking by this time next year, so it might be tough to sell your house at a reasonable price then, depending on your market.

[Flasch186]

Originally Posted by MrBigglesworth

The housing market could be tanking by this time next year, so it might be tough to sell your house at a reasonable price then, depending on your market.

totally depends on where you live. where is the home in question located.

Also, tanking is a relative term. It certainly wont be like the last 2 years but were the 3 years before that "tanking"?

[cubboyroy1826]

As a mortgage broker i am not a huge fan of the bridge loans due to the fact i have seen a couple people get stuck where they could not sell their house. One of the clients i advised not to do the bridge loan wound up having their old house go into foreclosure. This is obviously the extreme but it can happen deoending on your area this may not be a concern. What about doing a construction loan? This allows the builder to tap into money as he builds the house and you can usually defer all payments until the house is done. If you have other questions shoot me a PM.

[BrianD]

The home is located in Green Bay Wisconsin. It is in a decent area and at least one other house on the street sold within a month or two.

We will be looking at a construction loan, but my understanding of the bridge loan was that it would combine the current mortgage and the construction loan into one so the combined payments wouldn't be too high.

[Flasch186]

one thing is to remember any home, anywhere, will sell...its just a matter of price. So if things get too desperate you can always be aggressive with the price, to "dump it" but there are other things that come into play, loan payout, etc.

[stevew]

Maybe try to sell your house now, but at a bit of a higher rate than you would expect to get for it next year. If it moves now, you get enough of a premium, ideally enough more to pay for a year's lease on an apartment

[Flasch186]

Originally Posted by stevew

Maybe try to sell your house now, but at a bit of a higher rate than you would expect to get for it next year. If it moves now, you get enough of a premium, ideally enough more to pay for a year's lease on an apartment

yup

[cubboyroy1826]

The contruction loans out there typically are of two kinds. a) you make payments throughout the process for interest only based on what is drawn from the loan and b) you roll the interest back into the loan each month and settle up at the closing.

[BrianD]

Originally Posted by stevew

Maybe try to sell your house now, but at a bit of a higher rate than you would expect to get for it next year. If it moves now, you get enough of a premium, ideally enough more to pay for a year's lease on an apartment

This is probably what we will end up doing. I was really hoping to get some good info on ways to make the bridge loan work and avoid the apartment hassle, but I've been getting this advice from a number of different people. I guess apartment life will be back in my future.