Buying a home and selling a home can be a daunting task. Try to do both at the same time? It can feel really impossible. Fortunately, there are solutions, including Home Swap, an innovative lending program that helps remove stress from such a complicated transition.
Home Swap offers a new approach to buying and selling real estate, with financial tools that allow you to purchase your dream home first and take care of your current home later. There are some other great benefits, like a down payment of up to $ 25,000 towards home improvements before a sale. Here's what you need to know about it, including answers to some frequently asked questions about the program.
What is a Home Swap?
Home replacement is a loan program designed to help existing homeowners buy a new home without first selling their existing home. It functions similarly to a traditional bridging loan, which is a short-term loan that people can use towards securing long-term financing. Instead of selling first and then finding temporary housing while searching for a new home to buy (or worse, taking out two mortgages), homeowners are given the flexibility to close their new home and then go through the sale process. That means no double mortgages and no juggling of schedules to try and minimize the period between closing.
How does Home Swap work?
Homeowners get a pre-approved and fully signed home loan loan with the company behind Home Swap. Guaranteed a convenience fee of 1.25% of the purchase price of the new home, the loan also includes a down payment. (Home exchange users can pay 1.25% can at closing or roll it to what they borrow.)
When they find the home they want to buy, buyers submit their offer and do not have to sell their previous home to close. With the move, they will start making payments on their new mortgage while the company’s down payment covers payments on their old mortgage for up to six months.
When settling into their new home, homeowners will list their old home for sale. If they need to make any improvements before the sale, they can take out up to $ 25,000 home replacement loans for the job.
Homeowners sell their old homes through a real estate agent of their choice. Suppose the home is not sold on the open market within the six months in which the mortgage payments are transferred through Home Swap. In this case, homeowners have the option to sell their home directly to the company for a pre-determined offer usually about 80% to 85% of the fair market value for the property.
Just like with a regular apartment loan, the company sells your loan after closing it, and will pay off your mortgage payments to the company that buys it. The payment for the home exchange loan is a convenience fee of 1.25%.
What are the benefits of using Home Swap?
The biggest advantage is that homeowners do not have to sell their current home before they buy their new home. This is a huge advantage because most people do not have the financial flexibility to take on the risk of paying off two mortgages at the same time. Of course, you're still paying for your first mortgage with Home Swap, but it's rolled into the amount you borrow so you do not make two checks each month. Also, since you are moving apartment before presenting your first home, you do not have to find a way between everyday life with open homes.
Another major advantage is that buyers can avoid sales cases, which prevents them from closing if their old home is not sold. This provides greater confidence to both buyer and seller, that the latter may find the buyer's offer more attractive as a result. The offer itself functions much like cash because the company guarantees that the loan will be financed on the closing day.
Replacing homes versus traditional loans
Once you close your new home and your loan is sold, it will not be possible to distinguish it from a traditional mortgage. The main differences between home replacement and standard loans occur before closing, plus the services you receive through Home Swap for the sale of your original home.
Keep in mind that with convenience come fees, so while you may well get more money for your money with Home Swap, you will pay extra for it using the 1.25% set convenience fee, which may be more than the source fee you had. Guaranteed with a traditional loan.
You still owe all the usual closing costs if you go with Home Swap, including title-related fees, attorney fees and loan fees. The only difference here is that if you go with Home Swap, you also owe a 1.25% convenience fee; However it can roll into your mortgage if you do not want to pay it off in closing.
As with any home loan, your rates will still depend on your qualifications. The better and less risky your credit to a borrower, the better terms you will get on your loan, whether it is with Home Swap or with another lender.
Flexible housing options
As with any home loan, you can use Home Swap to buy and sell different types of housing. Apartments, townhouses and new construction are all eligible and will not prevent you from getting financing.
As long as your relevant information does not change between approval and closure, you are guaranteed cash backed, unconditional through a home loan. This gives the seller 100% confidence that the financing will take effect on the closing day, regardless of whether your second home is sold.
Impossible cases of non-sale are possible with traditional loans, but since they are risky for lenders, you will need to get the cash to support them. Home equity loans, bridging or savings loans are ways to do this, but they will take place separately from your new mortgage.
You can get a traditional mortgage anywhere, but Home Swap is only available in limited areas. As of January 2022, the program operates in select metropolitan areas in 15 states (with plans to expand to more than 100 markets over the next two years): Arizona, California, Colorado, Florida, Georgia, Illinois, Maryland, Michigan, Minnesota, North Carolina , Oregon, South Carolina, Tennessee, Texas Washington. Visit the Home Swap Cities page for a complete list of locations.
Guarantee for closing date
If you are in a hurry to move into your new home, you are in luck. With Home Swap, you are guaranteed a 30-day closing period on your purchase, and if it extends that time, they will give you $ 5,000.
If you need some extra cash to improve your current home before the sale, you can use the Home Swap home preparation service to secure up to $ 25,000 for your projects. The company will even include the contractors it chooses and handle payments after signing the completed work. With a traditional apartment loan, you will need to finance any repairs and improvements by alternative means, such as a home equity loan, a personal loan or credit cards.
Home Swap Reviews
Is Home Swap Legal? Yes, home exchange is a real plan that apartment buyers can use to buy a home and sell one at a time - or use to purchase a home as a first time buyer.
Additional options for buying and selling a home at the same time
Home replacement is a nice option for buyers who also need to sell, but it is not the only one. If you are in the market to buy and sell at the same time, here are some of the other ways you can fund the move:
Home Equity Line of Credit (HELOC)
HELOC is a loan that allows homeowners to borrow up to the amount of equity in their current home. The longer you live in your current home, the more equity you will have in it - and so you will be able to borrow more with HELOC.
HELOCs are much like credit cards in that you have a set limit on the loan (your capital balance), and you can take what you need when you need it. To buy a new home, however, you can go ahead and get as much out of the limit as you need and then put it up for purchase.
Please note that while the normal repayment period of HELOC is about 20 years, you must repay the loan in full before you close a sale of the property. This should not be a problem as long as you can sell your home for at least an amount equal to your mortgage at the moment.
An apartment swap is an example of a bridging loan, a short-term loan that you can take out to “bridge” the period between buying a new apartment and selling your old one. A regular bridging loan (also known as a swing loan or gap financing) will not come with the added benefits of replacing a home, but it can still be a good choice depending on your circumstances.
Like HELOC, you will lend against the equity of your home through a bridging loan. Unlike HELOC, you do not have an extended repayment period that can hold you if your home is not sold immediately. Mediation loan repayment periods usually begin after 12 months, at which point you will be responsible for repaying the loan and paying the mortgage on your new home, provided you have not been able to sell.
The benefits of a bridging loan are the flexibility it provides and that it gives you the ability to make an unconditional offer, and perhaps even a higher down payment. Disadvantages include the said short repayment period, high interest rates and additional closing costs.
An Instant Buyer, or iBuyer, is a company that bypasses the regular real estate sale process by buying your home from you and then takes on the task of marketing and selling it once it is not in your hands. This is a relatively new type of company and service. It faced some controversy. IBuyer with one big name closed a store after consumer complaints that they had deliberately raised prices. The company itself says they closed the plan because of an inaccurate price forecast and too much inventory.
Aside from controversy, iBuyers seem to be an evolving trend that can help homebuyers with a property for sale. This is an attractive premise, but it comes with some variable costs. This includes a 5% service charge on the sale price of your home, and iBuyers will also deduct the cost of any pre-sale repairs required from your net income. They are also not currently available in all markets, so iBuying may not be an option where you live.
Make your home for rent
Another option to consider when buying a home when you already own it is to rent your current home and use that money to pay off your mortgage until you are ready to sell. It may be easier to find a tenant than a buyer for your home, and if apartment prices are going down or it's a buyer's market, it will allow you to get out of it until you can (hopefully) sell with money.
There is one significant downside to going this route, and that is that renting your home does not give you money on hand to buy your new home. You will be limited to savings and a new home financing mortgage you are buying, and will still be in a situation of two mortgages at the same time. This may not be a problem if you have enough cash, but it is understandably a bit difficult to manage otherwise.
Should I use Home Swap or another option to buy and sell?
The way you ultimately decide to go when buying and selling at the same time depends on a number of personal factors, such as your current financial situation and the real estate market in your area. To help you navigate your options, we recommend working with a financial planner and a certified real estate agent. With a little research and planning, you should be able to find the perfect option for your needs and successfully purchase the new dream home without having to first sell your current home and find short-term housing in the meantime.
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