They’re called “swings” or “bridges”—but they don’t belong on a kindergarten playground. They’re the specialized loans that can help St. Cloud home buyers get past the kind of cash crunch that can snag an otherwise perfectly achievable purchase.
This is a timing situation that happens quite frequently; it’s in the nature of residential real estate transactions. Suppose you are selling your St. Cloud home to an out-of-state buyer. The deal is well on its way to being finalized on the agreed schedule. Meanwhile, you have found a new, bigger place that’s perfect for your family (it’s in St. Cloud, too—also in a great neighborhood). The problem is that you need to close on the new home before the sale of your current one is finalized. That’s the cash crunch.
The solution can be a bridge loan (AKA, a swing loan). It’s a loan for the short period of time that will allow a home buyer to close on the new home purchase as the other sale closes. Of course, the problem is (this is what the lender has to be thinking) what if the sale of the old house falls through? The answer is to be able to produce a binding contract for that sale—without it, there is little chance the loan will be granted.
Bridge loans aren’t terrifically popular with lenders, since they involve a certain amount of paperwork for a transaction with such a short duration. I find that lender reluctance is minimal when we deal with one which is already involved—either holding the earnest money deposit or otherwise engaged with the parties. Even so, the terms of a bridge loan will be more expensive than other kinds—but since the term is brief, the higher interest cost does not amount to much of a deterrent.
Bridges and swings aren’t the only possible way to solve the buying-before-closing dilemma. Sometimes a line of credit (HELOC) on the old house will fill the void, particularly if it has not yet been entered in the St. Cloud MLS. If it is already listed, the line may come with some extra charges, including cancellation or closing charges to compensate for the likelihood of its short duration. It is sometimes also the case that the lender financing the purchase of the new home is willing to provide a bridge loan by using the old property as security. Although that is a secured loan, it’s likely to be an expensive one.
When my clients buy or sell, or, as in some of these situations, buy and sell, some of what I do is to help put together creative solutions. Seeing you successfully sell—or move into—your St. Cloud home is what my service is all about. It starts when you give me a call!