 Bridging
the gap from home to home
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 Dear
Dr. Don,
I own property ($70,000) by Lake Talquin outside of Tallahassee.
I also have a mortgaged home in Plantation, Fla., with equity in
that home of over $100,000. There's also $80,000 in cash available
that I will use to build a new home on the property. What are my
options because the house we want our contractor estimates will
be $250,000? I would expect a mortgage in the amount of $70,000
or $80,000, but I will need a bridge loan until my house is sold.
I can't do that until my new house is finished.
-- Sharon Straddle
 Dear
Sharon,
You have a host of options in arranging permanent financing for
your new home. A construction to permanent financing package is
likely to be the best choice because it only requires one real estate
closing.
Look into the rate-lock options at closing. If you
decide on a rate lock, you want a lock period that's long enough
to be as certain as you can be that the home will be finished before
the rate lock expires. The Bankrate feature, "Locking
down a construction loan," explains the issues in greater
depth.
If you have the income and credit rating to handle a $170,000 mortgage
on the new place while continuing to make payments on the old place,
you can finesse the bridge loan issue by making a lump-sum additional
principal payment on the new loan after you sell the old house.
You have to make sure that the loan allows the payment and that
the payment won't trigger a prepayment penalty on the new mortgage.
You can't convert from construction financing to permanent financing
until the home is finished. If you're going to wait until your new
home is finished (or almost finished) before putting your existing
home on the market, and you can't finesse the issue, then a bridge
loan is a realistic solution. The Bankrate feature, "Securing
the loan: Bridge loans," has more about bridge loans.
Don't leave yourself cash poor by putting all your available cash
into the house. Make sure you have a reserve for emergencies, and
don't forget to budget for furnishing and decorating your new home.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."
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