Georgia Homeowners: Unlock Equity and Buy Before You Sell with a Bridge Loan
Selling your current home while trying to buy a new one is a common dilemma for Georgia homeowners. Imagine this: you finally find that perfect place to call home, but your own house hasn’t sold yet, leaving you in a bit of a bind.
Homeowners often dream of perfectly timed closings, selling their old place just a few days before moving into the new one, so they can avoid relocating twice and renting for a while. Trying to sync these timelines can be a real headache, turning a supposedly exciting milestone into a stressful balancing act. Fortunately, there’s a solution to this dilemma: bridge loans.
As a short-term financing option, bridge loans offer the unique advantage of helping you purchase your new home before you’ve sold your old one. This innovative solution might just be the missing piece in your home buying and selling puzzle. In this post, we’ll provide tips and insights about bridge loans in Georgia and how to Buy Before You Sell.
DISCLAIMER: As a friendly reminder, this post is intended for educational purposes, not financial advice. If you need assistance navigating the use of a bridge loan in Georgia, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan?
A bridge loan is a lifeline when you’re in the thick of transitioning from your current home to your next one. Essentially, it’s a short-term loan that offers you the necessary funds to secure your new property before your existing home sells. This type of loan leverages the equity in your current home, giving you the financial flexibility to make a down payment and handle closing costs on your new purchase.
Picture a bridge loan as your financial stepping stone. It serves to “bridge” the often tricky gap between the sale of your old home and the acquisition of your new one.
Typically, bridge loans are structured to last between six months to a year, though the exact duration can vary based on your unique financial situation and the specific policies of your lender. Due to their temporary nature and the inherent risks involved, bridge loans usually carry slightly higher interest rates compared to traditional mortgages.
How does a bridge loan work in Georgia?
In Georgia, a typical scenario where you might consider a bridge loan is when you’re eager to snap up your new dream home before your current one has found a buyer. In this situation, the equity from your existing home becomes your financial springboard, covering the down payment and closing costs for your new abode.
Often, the same lender who’s working with you on your new mortgage will also facilitate your bridge loan. They usually require that your current home is already on the market and offer the bridge loan for a period ranging from six months to a year.
A critical aspect your lender will assess is your debt-to-income ratio (DTI). This calculation takes into account the mortgage payments on both your old and new homes, along with the interest-only payments on the bridge loan (if applicable).
However, if your current home is already under contract and the prospective buyer has secured their loan, your lender might only consider the mortgage payment on your new Georgia home in the DTI equation.
What are the benefits of a bridge loan in Georgia?
Bridge loans in Georgia come with several advantages that can make your homebuying experience smoother and more flexible:
