Want to buy before you sell? Cross-collateral loan could be the answer

COMMENTARY /// Buying and selling homes

Freund

Freund

I had clients call me recently. They were so excited. They finally found the one-story home they’d been looking for and wanted to write an offer on the house right away. Unfortunately, not only had they not sold their current home, it wasn’t even on the market.

In years past I would have had to disappoint them by saying they’d have to wait to purchase a new home until they sold their current home. Even if they could pull their equity out of their current house with an equity loan, they could not afford both house payments.

Fortunately, I knew about a new cross-collateral loan offered by Felicia Wellborn at New Penn Financial. They were able to write that offer right away instead of waiting.

“The cross-collateral loan program was the perfect fit,” Wellborn said. “We were able to lend them the money using both properties as collateral: one note and two trust deeds.”

How does that work? First, two appraisals are ordered, one for each house. Once the value is established on each property, New Penn Financial will lend up to 75 percent on the total value of both properties. With the money from the cross-collateral loan, the current mortgage is then paid off, providing one house payment on both homes. The terms of this outside-the-box loan are very favorable. It is anowner-occupiedd adjustable rate mortgage, fixed for seven years and set at current market rates.

Wellborn

Wellborn

After the loan closes, the borrower can decide whether to keep their former home and rent it out as an investment or sell. Should they decide to sell it, the proceeds are used to pay the principal balance down on the one loan.

Then—and this is the best part—the lender will re-amortize or “re-cast” the loan and adjust the payments down based on the new principal balance. There is no extra cost or fee for this change.

This is a key part of the program. Without this feature, the seller could plop down a big chunk of cash after selling the old home but the payment wouldn’t adjust. Recasting changes all that.

My clients closed escrow on time, on the date agreed to in the contract. Now I’ll sell their former home. Clean and easy.

For more information on this loan program, call Tim Freund at (805) 427-3008 or email tim@1000oaksrealestate.com, or call Felicia Wellborn at (805) 813-3303 or email fwellborn@newpennfinancial.com.