Bridge Loans | How to Buy and Sell at the Same Time

Hi there! Emily Farber from Lepic-Kroeger, Realtors in Iowa City, Iowa. welcome to “Lunch With A Lender.” I’m here with Eric Baumgarth from the University of Iowa Community Credit
Union, and we are not only eating french fries and burgers, but we’re talking
about bridge loans. Emily: Today I am meeting with a lender, Eric Baumgarth of the University of Iowa Community Credit Union, and we are going
to discuss the elusive bridge loan. Hey, Eric! Eric: Hey, Emily. Emily: Let’s talk about bridge
loans. Can you explain why a buyer might want to use a bridge loan in today’s
market? Eric: Absolutely. Let’s say you’ve got your existing home, and you’ve got equity
built up in your existing home, and you need to use that as the down payment on
the new property. That’s where a bridge loan comes into play. We’re going to use
like a short-term home equity product to kind of pull out that equity on your
existing property and use that as down payment before you have it sold. Emily: That’s vital in today’s market because when you’re in a strong seller’s market, homes
are selling so quickly that a seller may not be interested in your offer if it is
contingent upon you selling your house. So, Eric, who might qualify for a bridge
loan? Eric: Good question. What we look at is, technically speaking, a few months after
you purchased the new home you’re going to end up with two house payments as a
worst-case scenario. Well that’s next question…anyway. So, what we
have to look at is we have to look at your overall debt ratios– your income to
your monthly debts– and we have to support that with both house payments
into the equation. So essentially we’re just gonna look at it with both house
payments as a worst case scenario, and if you’re if you still qualify, then we
would love to help out with the bridge loan. Emily: So, we just touched on it briefly,
but what are some of the risks and what are some of the benefits of the bridge
loan? Eric: So, on one hand a bridge loan can be pretty simple. If you already have an
accepted offer on your current home then we can see when the finish line is going
to kick into play. So, you may not end up with actually having to house payments.
If you don’t have an accepted offer by the time we closed on the new home, your
first payment on that new property is going to be that second month away. So if you haven’t sold your existing
property by that time you’re gonna end up with two house payments. Emily: Nobody wants
that to happen, and that’s why you need to hire a real estate agent who’s going
to work hard for you and have your home priced realistically in order to get it
sold. So, can you tell us what is the cost of getting a bridge loan? Eric: Great question.
So, we work with our retail partners here at the University of Iowa Community
Credit Union to do that bridge loan or a home equity loan and they just need to
do a lien search and record that mortgage. So, essentially your costs are
going to be $300 or less, typically, and then from there
you’re only gonna pay interest on that bridge loan until it’s paid off. So, it
could be 30 days of interest, could be 60 or 90 days, it just depends on how long
that bridge loan lasts. Emily: What do those interest rates look like? Eric: Right now it’s
pretty much tied to our home equity interest rates so those are going to be
monthly promotions that are set out so anywhere from low 4.0s% on an
interest-only basis, or we can actually stretch that bridge loan payment over 30
years if you’d like. That rates gonna be a little bit higher. Emily: All right.
Thanks, Eric! If you have any more questions about bridge loans I’m sure
Eric at the University of Iowa Community Credit Union would be HAPPY to tell you
more about it, and we just want to thank you for joining us today! As always, I put
out videos every Friday, if not more often. If you haven’t done so please
subscribe to my channel and hit that bell icon down below. When you hit that
bell then you will get a notification every time I put out an awesome new
video. All right, catch you next time! Eric: Thank you!

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14 thoughts on “Bridge Loans | How to Buy and Sell at the Same Time

  1. I think bridge loans are great! I have had clients do them though recently lenders telling me no one really does them anymore here 🤷‍♀️

  2. Great stuff. I haven't thought about a bridge loan in a loooong time. But it could be great for the reasons Eric described. Thanks.

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