Bridge Loans??

[KristyK]

I looked and couldn't find a thread about this.

Has anyone ever taken one of these out? From what I understand it's having your mortgage company pay off your old mortgage on your old house while financing the purchase of your new house. It's supposed to be so you don't have to pay 2 mortgages at once and when your old house is sold it pays off the old house mortgage money.

I'm also confused but I was told that if your house doesn't sell, you can make just a minimum interest payment on the old mortgage until it sells. That way you're never making 2 full mortgage payments.

So, is my information correct? And if anyone does know, is it possible we can do this buying a house in a different state then our old home? We'd like to be able to move right into a new house in FL when we get there, and although we'll have ours on the market, if it doesn't sell, we'd like to know we're ok moneywise until it does.

So any tips? Ideas? Mortgage companies that do this? Anything is appreciated! TIA!

[amd1005]

I work in the mortgage dept at a local bank, but I think we've done one bridge loan since I've been there (almost 2 years). I have never heard that the mortgage company will pay your existing mortgage for you. What I know about them is that you're taking a mortgage out on your existing home to cover the down payment on a purchase. Then when the house sells, it will be paid off. As far as I know, you still have to pay monthly payments on both mortgages, but you may be able to get an interest only bridge loan which would lower the payments. I think this might be the kind of program that varies depending on the lender, though. Your best bet might be to call around. Try a variety of lenders/banks in your area.
Sorry I can't help more, but like I said, I think the programs vary depending on the bank.

[hmbay]

we did something similar but I'm not sure it was a bridge loan by name but it probably was. we had mortgage #1 on house we were selling. We took out a home equity loan against house #1 to put the downpayment on house #2 when the house wasn't sold and house #2 was done (had the house built). House #1 actually didn't sell so we put renters in it for a year and during that year we had to pay mortgage #1, HEL#1 and mortgage #2. HEL was an interest only loan. We paid a few hundred in interest each month but could not pay off the principle until house#1 was sold at which point we paid off mortgage#1 and HEL#1. It's something you can do but honestly having done it I'm not sure the stress was worth it--and we were not offered any option to pay off mortgage#1 with any sort of loan--only to borrow against its equity to help finance #2..

[ThreeYell]

I recently researched bridge loans and HELOCs. A bridge loan is what you said - the lender pays off the morgage on your current home and refinances it to you as interest only. They can lend you the equity you have, also interest only. I was quoted an interest rate of prime+1 from several places, so about 9.5% and it is possible for a lender to do it for houses in two different states.

If you think you can swing making mortage payments on your old house and a new house, you can also look into a HELOC which I was quoted at prime-1, so about 7.5%. This will let you get the equity out of your old house to make a down payment on a new house. For a HELOC, you will need a lender that has a presence in the state where your old house is located, though it doesn't need to be the same lender you're using for the mortgage on your new house. One thing to consider with a HELOC is that you might need a cosigner or to do a non-traditional mortgage on your new house until the old house sells. The debt/income ratio can be tough if you've got two mortgages pluse a large HELOC.

Let me know if you have any questions. After researching all this, we decided it was too much trouble and that we would wait until our old house sold before buying a new one. Fortunately our house went under contract about a week after we decided that.

[KristyK]

I'm not sure what we'll qualify for yet. We're waiting until DH gets back from the east coast to go to banks and see about loans. We don't think we'll be able to handle 2 mortgages, which is why we were thinking of the bridge loan. I know my gf did this when they built their house, but it was a new construction they were taking the money on, so not sure if it will work for an already built home.

Guess we'll see how things work.

Thanks again!