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Housing Market

Do I have to sell my home before I buy the next one?

sell my home before buying the next one

The housing market has changed drastically since 2020. Home equity is higher than ever before, rates remained historically low for an incredible period of time, and multiple offer situations have become the norm. Each of these three housing market characteristics has posed big questions in the minds of buyers:  

  1. Should I use the equity in my current home as a sizable down payment on the next one?
  2. Is now a better time to buy than later because rates are so low?
  3. How do I make the most competitive offer without breaking the bank?

In this article, we propose that a Bridge Loan may help you answer these questions. To put it succinctly, a bridge loan allows you to use the equity in your current home as the down payment on the next one before you sell. 

“How do I use the equity before I sell my home?” 

Let’s say you bought your perfect, 3-bedroom/2-bath starter home five years ago and the current principal balance is $250,000. In today’s market, your home could easily go for an average of $330,000. That would mean you have $80,000 in home equity. $80,000 of equity could translate into a 10% down payment on an $800,000 home. That’s a lot more house! 

The question is, how do you actually tap into that equity? Buyers and their Realtor will often arrange a contingent offer. You are telling the seller, “I promise to honor this offer… As long as my current home sells on time.” Truth be told, it’s a stressful situation. Taking out a Bridge Loan, on the other hand, will allow you to put that $80,000 down, give yourself breathing room to sell your current home, and then pay off the Bridge Loan when it does. 

Your Offer, Made Competitive 

“Does the seller take the fact that I need to sell my home into consideration?” The answer is yes. Sellers and their Realtors are commonly receiving multiple offers at lightning-fast speeds in today’s market. Two ways in which offers could be sorted through are “Who offered the most?” and “Which sale will be the easiest?” A Bridge Loan can help you offer more than the liquid cash you have available, of course. And, as mentioned above, you will be making a non-contingent offer. Sellers like that. 

Thinking this might be your perfect time to buy? Talk to a mortgage expert to see how quickly today’s incredibly low interest rates, combined with record-high levels of equity can get you through the door to your dream home.