Bridge Loans vs. Recasting

How Does It Work?

• Loan Program - Typically, a bridge loan is simply a home equity line of credit (HELOC). The term “bridge loan” usually refers to how and why the funds are being used. *Network Funding does not offer bridge loan financing or HELOC's at this time; instead, we can recommend local banks that do.
• Equity - In order to utilize a bridge loan, you will typically need to have more than 20% equity in your current home.
• Size - The maximum size of your bridge loan will usually be limited to an 80% Combined Loan-to-Value (CLTV) and up to 50% of the value of your property.
• Closing Cost - The cost of a bridge loan can vary depending on the bank providing the financing and whether or not an appraisal is needed. The fees are typically less than a regular refinance but can still be in the $1k-2k+ range.
• # of  Closings - An additional closing is needed with bridge loan.
• Timing - Most banks can close bridge loans in about 3 weeks.

Ideal If...

• Minimum Cash - If you do not have the minimum funds needed to purchase a new property, a bridge loan may be ideal.
• 20% Down -  Bridge loans may be ideal when trying to avoid either mortgage insurance (PMI) or escrows on the new home, by helping you get to at least 20% equity.

Other Benefits!

• Renovation -  If you need to renovate either property (the one you are selling OR the one you are buying), this is an easy way to liquidate cash to pay for the improvements.
• Lot Purchase -  If you're thinking about building a home and need to purchase the lot first, this could be a good option for acquiring it.

How Does It Work?

• Loan Program - Recasting is not a loan program but rather an option that is offered on conventional loan programs and many Jumbo loan programs. Typically, it is not available on government loan programs.
• Equity - As long as you have enough funds to put down the minimum required down payment on a home purchase and you are using an eligible program for recasting, you can recast your loan once your funds are available (see timing section).
• Size - Most loan providers will have restrictions on the minimum amount of funds needed for a principal reduction (usually $5,000) to be eligible for recasting, but there is not usually a limit on the maximum amount.
• Closing Cost - The cost for recasting varies based on your loan servicer, typically the cost is an administrative fee for restructuring the loan payments, this is a one-time fee that can range from $0-$450.00.
• # of  Closings - An additional closing is not required, as recasting is not a refinance transaction; it is simply an update on the loan itself. The terms of the loan will not change, only the monthly payment is changing as a result of the balance decrease.
• Timing - Most loan servicers will require you to make your first monthly payment before you are eligible to recast your mortgage.

Ideal If...

• Minimum Cash - If you do have the minimum funds needed to purchase a new property, recasting may be ideal.
• 20% Down -  Recasting may be ideal if you have can put 20% down on your new house before selling your current home.

Other Benefits!

• Less Loans -  When taking a recasting approach to your next home, it often saves the need to establish a bridge loan, so you only have your new home loan and your old home loan.
• Timeline -  If you have the funds to do the minimum down payment on the purchase of a new home, you can go ahead and put that house under contract.  With a bridge loan, you need to secure that financing before you close on the new home; with recasting, there is nothing to wait on.

Can I use both?

Why buy before I sell?

• Less Stress - Focus on finding the right house without a time crunch.
• Less Logistics – Move when you're ready, not when you have to.
• Better Negotiating - Make a stronger, non-contingent offer.

What's the catch?

• Equity - You must have enough equity in your current home for either to make sense.
• Assets – You'll need some additional assets to qualify for either option.
• Income - You'll have to qualify to carry multiple mortgages at the same time.