How to avoid getting stuck with two mortgages during a move

(InvestigateTV) — Buying a new home before selling a current one can leave homeowners juggling two mortgages, or without a place to move into right away. A current home could sell quickly, while finding and closing on the next one may take longer in a competitive market.

Kate Wood, with NerdWallet, said lining up a sale and purchase perfectly is difficult in an imbalanced market, but there are ways to manage the overlap.

One option is a sale contingency, which ties the purchase of a new home to the successful sale of the current one.

“A sale contingency basically states some aspect of the purchase is contingent on, relies on you having successfully sold your home,” Wood said. “So when you are approaching a seller with this, saying, ‘Hey, in order for me to buy your home, I need to have sold my home,’ it’s a good idea to be working with a real estate agent that’s going to help you craft a really compelling offer.”

Wood noted that a sale contingency can make it harder to compete against cash buyers or those who are already pre-approved.

Another option is a bridge loan, which provides short-term financing to cover the gap between buying and selling.

“A bridge loan basically gives you a loan for 12 months or so that allows you to have the cash to make that next home purchase,” Wood said. “So you’re buying your next home, and then when you sell your previous home, you use proceeds from that sale to pay off the bridge loan.”

A home equity line of credit, or HELOC, is another option, though Wood said it needs to be set up before a home is listed for sale. A HELOC allows a homeowner to borrow against the equity in their current home to fund the purchase of a new one, then repay the loan using proceeds from the sale.