BUSINESS & FINANCE :: AUGUST/SEPTEMBER 2007
Home-to-Home Loan Financing: Make Contingency a thing of the past!
What does this mean for you? You have found a new home to purchase. Suddenly you are faced with selling your home quickly to move forward with the purchase. You don’t want to be faced with making two mortgage payments, and you need the equity in your existing home to purchase the new home? How? Consider a Home-to-Home loan (otherwise know as the Bridge loan).
Feature: Allows up to 12 months to repay. Benefit: Ample time to sell existing home.
Feature: No out-of-pocket expenses for (6) six months. Benefit: This allows the Bridge loan monthly payment not to be included in the Ratio calculations on Portfolio loans.
Feature: Removes the contingency on the purchase transaction benefits. Benefit: Hassle Free! No worry about having a contract on the “for sale” home.
Feature: Proceeds to fund all costs for both the Bridge and Purchase transactions. Benefit: No “out of pocket” cost.
The Bridge loan allows borrowers to use up to 90% of the value of the “for-sale” home, minus any existing liens, prepaid interest, and closing costs, as the down payment for their new home purchase (no MI is associated with the Bridge Loan).
The existing mortgage on the borrower’s “for-sale” home is REFINANCED with the “Bridge Loan”.
Closing costs and six (6) months of prepaid interest-only mortgage payments are included in the refinance. The remaining proceeds are available for the down payment on the borrower’s new home.
The SunTrust Bridge Loan can only be approved in conjunction with a Purchase Money Loan on the borrower’s new home.
Borrower must have a sales contract for their NEW home in-hand when applying for the Bridge Loan.
Six (6) months of interest-only mortgage payments are withheld at closing. At the end of the six (6) month period, borrower will begin making interest-only mortgage payments for the remaining 12-month term of the loan. Any unused portion of the pre-collected interest will be refunded upon sale of home.
Let’s review the spreadsheet. Your current home value for the bridge loan is based on appraised value. Take 90% LTV (Appraised value multiplied by 90% = Loan to Value LTV) to calculate how much of your homes equity that can be used. Subtract the outstanding debt on your existing home (1st mortgage plus any other liens against the existing property). The mortgage company takes 6 months of prepaid interest and holds it in an escrow account (this money is actually making the interest only payments for the next 6 months while you have the time to sell your home). Subtract the costs for the refinance. Now you have the proceeds for the new home.
Take the proceeds from the bridge loan, and subtract the closing costs on the new home purchase to give you your down payment. Take the new purchase price and subtract the down payment for your loan amount.
Maybe you have had your bridge loan in place for 2 months, and suddenly your previous home has found a buyer. The mortgage company pays off the bridge loan. You then will receive additional proceeds (remember the mortgage company could only use up to 90% Loan to value). You will receive the proceeds (sale of your home less the bridge loan payoff, less real estate commissions and transfer tax). Also, the prepaid interest (the 6 months collected by the mortgage company) not used to make the interest only mortgage payments will be refunded to you.
You may be interested in interest only mortgage, because once you have sold your previous home you may want additional monies to go towards the principle balance. By making additional payment towards principle one can lower the interest only payment once the bridge loan is paid off.
Refinance your home for $2,000.00 to allow for the additional 6 months to sell your home as opposed to lowering your home sales price by $10,000.00 to sell it fast. It’s your money. Have the time to move in to your new home without the stress. Make contingency a thing of the past, and ask about a Home-to-Home Loan.
Contact a SunTrust Mortgage professional to assist you with the knowledge of a Home-to-Home loan as well as other products to satisfy your financing needs.
Remember, it’s your money. Current market conditions have shown that a Home-to-Home loan maybe a healthy financing alternative.
Looking for Outstanding Service! Cheryl offers flexibility to you without the inconvenience of taking time out of your busy schedule. She can design a mortgage program to meet your specific needs whether you are buying, building or refinancing.
Cheryl A. Adams is a Residential Mortgage Consultant with Suntrust Mortgage Company, Inc. Cheryl has lived in Delaware since 1990. She is a graduate of Saint Joseph's University in Philadelphia and possesses a B.S. in Finance.
www.suntrustmortgage.com/cadams
