Mortgage Options

Mortgage Options for Tricky Situations
Realtor Magazine Online - www.realtor.org/realtormag

( February 20, 2006) -- When customers want to close on a new home but their current home hasn't sold yet, there are a number of financing arrangements that can help bridge the gap.

The odds of such a situation occurring is higher when the real estate market cools.

The most common interim financing tool for buyers is a a short-term bridge loan, which finances the down payment and closing costs for a new home. When buyers sell, they repay the bridge loan. While it provides lots of flexibility, this type of loan usually carries high interest rates.

A better alternative for some is a bridge loan with deferred interest payments. It pays off the first mortgage, eliminating one set of mortgage payments, plus it covers the down payment and closing costs on the new home. The seller often doesn’t pay anything until he sells his home.

A third possibility is 100 percent financing on the new mortgage. With no down payment needed, the buyer can manage until his old home is sold. However, the buyer must be approved to hold two mortgages.

Source: Wall Street Journal, Kirsti McCabe (02/18/06)