Creative Upsizing Part 2

Karl Miller
Published on January 22, 2020

Creative Upsizing Part 2

On the blog this month, we’re examining several financing options for families or individuals looking to upsize their living spaces. You can read part one here. Today we’ll continue with a second loan option, and a quick look at the “sell first, buy later” option.

Bridge Loan Financing:

Pros: This method works for owners with equity in their homes or with a strong income and low debt ratios. These financial strengths may allow them to get temporary financing to cover two monthly payments until their original home sells. With bridge loan financing, a purchase can make a strong, attractive offer with definitive terms. Since sellers prefer the certainty of a specific closing date, buyers are in a better position to negotiate other terms in the purchase agreement. A buyer can close on their new home without the pressure of time, move in at leisure, or even make various improvements on their own timeline.

Cons:

The biggest disadvantage is that the purchaser bears the risk of not knowing exactly what date their home will sell.  In a worst-case scenario, a purchase may carry a larger mortgage for several months before their house closes. At that time, profits from the sale are applied to the new mortgage balance and their payments reset permanently.

Although
this option definitely affords the purchaser more power, not all purchasers
will qualify for bridge loan financing
.

Sell First, Buy Later.

Pros: Increasingly sellers are seeing
that their dream home simply may not be on the market on the day they list
their current house. At the current market pace, with the median days on the
market for listings in the third quarter at 18; if a home is priced correctly,
shown skilfully, and located on a desirable lot, chances are it will sell fast.
If a highly motivated purchaser cannot make an offer without first selling and
closing, we are encouraging them to list their home and, as soon as an offer
comes in, go all out to find a new home.

Cons:

It might feel a little risky to commit to selling your current home before having a second one ready to purchase– after all, a bird in the hand is worth two in the bush, right? However, keep in mind that closing dates can be negotiated out a few months beyond the offer day, and a contingency clause can be added to the contract: closing made subject to the seller finding suitable housing.

If you
can handle the short period of uncertainty, this may be a great option for you.
And my commitment to clients in this option is that you will not be homeless.
We will ensure that you get the home you want in good time.

REGARDLESS
OF WHAT METHOD YOU FOLLOW, MAKE AN INFORMED DECISION. A good Realtor will guide
you along the way as you make these important decisions for yourself and your
family. For more tips, or to schedule a chat, give me a call. I value the
opportunity to consult with clients. Our business wouldn’t exist without you!
We have excellent systems and processes in place to help you get where you want
to be.

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