We are looking at a townhome, the realator suggested doing a swing loan, since we do not have ours on the market yet. I am very leary of doing this,

Asked by Kenandpat1221x1, New Cumberland, PA Tue Sep 13, 2011

SunTrust said that we could borrow the money and make no pymts, then pay just on the interest till our home sells. I believe I am sceptical, we our 60 years old and have never done anything like this. What if the economy turns bad, and our home does not sell? I don't want to give it away. Help!

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11
Erica Ramus,…, Agent, Pottsville, PA
Sun Nov 20, 2011
You are right to be skeptical. It is a dangerous thing, getting a swing loan. How much of a risk taker are you?

I can tell you I did this 11 years ago and it worked out just fine for me. However, I was able to carry 2 loans until my first house sold, and even then it was a bit nerve wracking. I accepted what was probably a lower offer than I should have, to get rid of the mortgage on the first house. In hindsight, I am not sure I should have done it. But it did work out in the end.

Don't let anyone pressure you into something you don't feel comfortable with.
0 votes
Erica Ramus,…, Agent, Pottsville, PA
Fri Sep 16, 2011
If you are uncomfortable DO NOT DO IT. You are right to be cautious. Get the opinion of a few other people you trust (another banker, your accountant, etc) before making a move that makes you leery.
0 votes
Calvin Willi…, Agent, CAMP HILL, PA
Wed Sep 14, 2011
Ken and Pat,

If you are leary I would get more answers before you make a decision. From what I can get from your question, I think making your offer contingent on the sale and settlement of your current home is the best way to go, only my opinion.
0 votes
Dp2, , Virginia
Wed Sep 14, 2011
"'Creative financing' for the most part involves putting people in loans they should not be getting."

Creative financing is one of my specialties, and this statement Is a blatant form of disinformation. It's a blanket statement that's wrong, dubious considering the source (a competitor), and lacking in insight about what creative financing truly is. Creative financing IS one of the oldest forms of financing, has been well documented over hundreds of years (it grew out of bartering), and has been around for much longer than the mortgage brokering business.

Don't get me wrong. I like work with mortgage brokers--especially to help qualify SOME of my potential buyers for deals that I'll flip with creative financing. Plus, those mortgage brokers usually are the ones with whom my buyers will qualify for the refinance.

Not all buyers who purchase with creative financing have messed up credit. Some buyers have 720 or greater credit scores, but might not be able to get another residential loan, because they already have maxed out according to the Fannie Mae or Freddie Mac guidelines. Others who also have 720 or greater credit scores opt to buy with creative financing to avoid dealing with the banks and their draconian rules for qualifying.

Creative financing is a choice. Some sellers choose it to sell their properties for a higher price; others (myself included) choose it because it gives us more options.

Ken, if you're going to put another overpriced listing on the market, then it will rot along with all of the others. Yet, if you price it correctly from the start, then you will sell it. If you're determined to move quickly, then you'll need to be more flexible on your price/terms.

Selling with seller financing is only 1 of many creative ways to sell your property. Another creative way to do it is to swap houses (meaning you'd buy the TH only if the TH seller would buy yours). A third creative way to sell your property--which doesn't involve you carrying back a loan--is to sell via an auction. And the list goes on. . . .

Before checking out this post, I didn't know anything about a swing loan. It sounds like it could be a good deal (provided the terms are reasonable) for the right people. Let's say that you were to put your property on the market and get that swing loan (4.5% interest-only) today, and sold your current property in 6 months. Assuming that the interest rate of the loan on your home is at least 4.5% APR (or higher--most likely), and that the face value (or the original amount that you borrowed) of your loan is $100K, you'd save at least $136.69/month over 6 months (or $820.14 total). Your savings would be greater if the interest rate of loan is greater.

Yes, one could argue that a portion of your payments might have been applied towards the principal in the amortized loan case. Yet, the amount of principal that would have been reduced over 6 months would only be significant had you already paid on this loan for at least 15-20 years. Nearly all of the monthly payment goes towards interest in the first 5 years of an amortized 30-year fixed. Besides, you could take the amount that you saved and apply it towards the balance of your new property.

Please don't misunderstand me. I'm neither encouraging nor discouraging you to/from getting that swing loan. I don't know enough details about your situation to know whether or not it would be a good/bad idea for you. Yet, since most of the other posters commented on the potential cons, I opted to present some of the potential pros for the sake of completeness.

Financing is a tool. In some the hands of some people, it becomes a weapon of mass destruction, and others' hands it becomes a surgeon's scalpel, or a dentist's drill.

Ultimately, you'll need to decide what's more important: the money, the terms, or your time. I know they're all important, but you'll need to prioritize. Afterward, you should sit down with the appropriate professionals to help you design a plan that you'll implement.
0 votes
Lauryn Eadie, Agent, Reston, VA
Wed Sep 14, 2011
Ken,

I would not consider a swing loan. In any market they have risk, but especially in a market like we are in now. With the economy and everything going on in the financing world, there is just no clear answer to when your home will sell. Why not wait till your home has a contract on it, and then start looking for a home. You can protect yourself by adding in contingencies.

Good luck
0 votes
Maria Gilda…, Agent, Manchester, CT
Wed Sep 14, 2011
Hello Ken and Pat.

First, do not consider the swing loan. Market is so volatile and precarious as it is. You do no want to be in a financial predicament as mentioned by Alan Openshaw.

Realistically, in this market, an offer with subject to buyer's selling its home, is unattractive offer. You lose your leverage on the negotiation table because of the Hubbard Clause.

Someone in this thread advised you to focus on selling your house by pricing it competitively. Then whatever you lose on your sale, you should be able to recoup from the purchase of your home.

In my opinion, this is your best course of action. You should consider having a real estate professional by your side.

Best.

Maria
0 votes
Maureen E. C…, Agent, Carlisle, PA
Wed Sep 14, 2011
If you are leary, go with your gut. Is this townhouse the only one that is available or are there other ones that are forsale. Is the realtor a Buyers Agent for you and looking out for your best interests?
0 votes
, ,
Wed Sep 14, 2011
Hello Ken and Pat,

STOP. You know that you are putting yourself in a position thtat can have devastating effects on your finances.
Can you really afford to carry two houses? Price your home right and get it under contract before buying another home. Make the purchaseof your new home conditional on the sale of yourexisting home. If they don't want to do that, don't try "creative financing" to get you into that home. "Creative financing" for the most part involves putting people in loans they should not be getting.

Best Regards,
Alan Openshaw
Cornerstone Lending
267 992 7276
VOTED BEST OF BUCKS 2010
0 votes
Janice Wheel…, Agent, Camp Hill, PA
Tue Sep 13, 2011
Your best option is to price your current home competitvely. Get it on the market at a very reasonable price, then as people begin to make offers you can seriously consider the swing loan after accepting an offer, or make your contract to purchase contingent upon the final settlement of your property.
0 votes
Dylan Galluc…, Agent, Camp Hill, PA
Tue Sep 13, 2011
This is a question that requires significantly more information than is practical or responsible to provide in a public forum such as this. You should be discussing this with your real estate agent. If you do not trust your agent enough to answer this question you should be using a different agent.
0 votes
George Holev…, Agent, Harrisburg, PA
Tue Sep 13, 2011
I would suggest making the purchase contingent on the sale and settlement of your existing home.
0 votes
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