Down payment. Where to find the cash for a down payment. Hmmmm.

I haven't sold my previous home yet, but I'd like to move forward with the purchase of a new home. Where can I get the down payment from?

This is a conversation we've been having with a number of clients recently. In some cases, these folks would like to move forward with the purchase of their new home but their current home has not yet sold. In other cases, they may have decided not to sell the existing home and rent it to a tenant instead. But in both cases, this means that the equity that they would have otherwise taken out (upon selling the current home) is locked up in that house for a little while longer. So what can we do about the down payment for the purchase of the new place?

We've actually seen a few creative solutions to this dilemma over the past couple of months. I will outline a few in the blog today. But there are many other ideas we could come up for your situation, so be sure to give me a call if none of these meet your criteria and we'll come up with a perfect scenario for you.

In one client's situation, they are actually planning to use the bonus that he is getting from his employer. However, the timing for receiving the bonus check will not correspond perfectly for the closing so family members are helping them out with a gift in the meantime.

In another scenario, the client is taking out a short-term loan against his 401k, but then plans to repay the loan as soon as he has the proceeds from the sale of his home.

In yet another client's situation, they have enough cash liquid that they can do a 5% down payment. So for the purchase of their new home, we are planning to finance about $150,000 on their permanent 1^st mortgage and finance the rest of the purchase on a temporary 2^nd mortgage of about $100,000. Then when their current home sells (they plan to fix it up a bit then put it on the market in the Spring) they will take the proceeds from the sale of their current home and pay off the temporary 2^nd mortgage, leaving them with just their $150,000 first mortgage. Pretty creative, right?

Years ago, we would have looked at bridge loan financing for transactions like this. And in some cases, we may look at doing a version of a bridge loan if that is what works best for the client. Tapping in to the equity of the current home could be a very viable alternative. But with so many other creative alternatives these days, a bridge loan may not be the most cost effective.

Let's sit down and review your situation to see what works best in your case. There could be a number of creative options that are right around the corner!