My parents are considering putting in an offer on a house that they want to buy with cash. But they don't want it to be contingent on the sale of their home in Texas.
The value of their IRAs, Roth IRA's and 401(k)s is 2 to 3 times the amount of the house they wanna purchase, but in the end my dad doesn't want to pull that out he wants to obviously sell his house and use that cash. But there's a risk of their house not selling in time to bring the cash for the house they want to buy.
What options does he have For loans or what not with either the equity in their current home which they have paid off for loans from 401(k) or IRA?
At a minimum their house will sell for about the amount the house they're buying but it might possibly be 10 or 20% more. They live on a private boating lake in magnolia that's entirely custom homes and so there aren't any great comps because no other houses on the lake have sold for a while. A few interior lots have sold for 90% the price of the home they are buying.

They can take out a HELOC on the current home. Up to 80% of total value. Just read the small print about early payoff. Most lenders pay pay most closing costs on these loans but can have prepayment penalties for those

Is there house listed? You can't get a HELOC on a house that's listed.

I have no answers but, maybe it was when Bryan was smaller & the bankers still knew you, I remember my parents getting a loan for a new house & then selling their old one and paying off the loan. I think they called it a "bridge loan". Do banks do that any more?

Jo makes a good point. Some lenders will let you withdraw the listing but some won't

jja79 said:

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Is there house listed? You can't get a HELOC on a house that's listed.

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it isn't listed.

My email is on my profile if you'd like a referral to one of our bankers in the Magnolia area that could discuss a HELOC with them.

jja79 said:

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My email is on my profile if you'd like a referral to one of our bankers in the Magnolia area that could discuss a HELOC with them.

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can you tell me about a bridge loan? A brief read sounds like it's what my dad is looking for.

Owns home outright and is roughly the value of the house they want to buy, has liquid funds that cover cost of home to purchase, so a sell of the home isn't absolutely necessary, wants to give cash offer without a selling contingency, and upon sale of home it will be used to pay for new house.
But in scenario that the sale takes longer than closing of new home, he is able and willing to pay a mortgage/loan installment until the house sells.

A HELOC is by far the easiest and least costly of the options I see based on that scenario.

jja79 said:

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A HELOC is by far the easiest and least costly of the options I see based on that scenario.

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If they're already considering putting an offer, a HELOC may take too long. Unless things have changed, but when we did our HELOC a couple years ago it took multiple months.

I don't think a bridge loan is very complicated. Assuming they're fine w/ their debt to income ratio. But, if I'm not mistaken, it'll add about 1% in closing costs.

Pulling equity from a Texas home is done under state law regardless of what you call it. You have an application, a 12 day waiting period and some form of appraisal. A drive by, a desk value or full inspection. A good lender who specializes in Home Equity should get done faster than two months. 25-30 days should be expected.

I just checked my emails. We applied for our HELOC with Amegy July 7, we closed October 11.

htxag09 said:

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jja79 said:

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A HELOC is by far the easiest and least costly of the options I see based on that scenario.

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If they're already considering putting an offer, a HELOC may take too long. Unless things have changed, but when we did our HELOC a couple years ago it took multiple months.

I don't think a bridge loan is very complicated. Assuming they're fine w/ their debt to income ratio. But, if I'm not mistaken, it'll add about 1% in closing costs.

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timing is critical. This is a very unique house on golf course that faces and backs to a fairway and backs to water, only 1-2 others like it in this 55+ community and neither with water. Went on the market yesterday, will sell very quickly.

Parents are retired, so no earned income, but $0 debt and about $10k a month worth of pensions and social security. Well he has an Rv note of like $250 a month.

He's looking at what fidelity can offer when we discovered a margin loan, but the more we read about bridge loans it seems tailor made for his situation.
The difference is he knows how much fidelity assets he has, he doesn't know what the house will appraise for (and therefore determine max heloc or bridge loan value). So now the margin loan seems like something for this situation.

Their house is min high 800s, but could be 1m. Again hard to comp without an official assessment since it's entirely custom neighborhood with no recent sales.

Denver house is $925k. Dad would cover up to maybe a ~$50k difference in cash if necessary.

Eh, why I said unless things changed. My experience was everything was delayed for a heloc.

Yes, it's just my one experience with one lender but I wish someone who used amegy would have told me that before I went through the process.

Carry on.

I had two helocs back in the day. One replaced the other. And yes it took awhile. I was using my wife's credit union and we located in CA. Took 2 months both times but we were not in a hurry. It was for planned kid college costs and planned.

Jj has a dept devoted to these and in Houston. I'll let him comment on turntime for his company

That's who my experience was with. But it was 2 years ago. We were similar to you. We had cash to float the renovation. But also didn't want to drain our cash. And the process was about 2 months longer than we expected. But we were new to the process and don't think we asked the right questions going into it. During the process we just got kept getting the same line of "we're overwhelmed with this promo, sorry trying to catch up".

I'd imagine any company offering HELOCs would have data on time to close. So I'd make sure to confirm that if doing it again.

It might be delayed, I don't know. Don't know when you did yours. I know when we have run 0.9% for a year special applications went from 25 a week to a thousand which did delay some things.

jja79 said:

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It might be delayed, I don't know. Don't know when you did yours. I know when we have run 0.9% for a year special applications went from 25 a week to a thousand which did delay some things.

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We applied during that promo.

62strat said:

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jja79 said:

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My email is on my profile if you'd like a referral to one of our bankers in the Magnolia area that could discuss a HELOC with them.

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can you tell me about a bridge loan? A brief read sounds like it's what my dad is looking for.

Owns home outright and is roughly the value of the house they want to buy, has liquid funds that cover cost of home to purchase, so a sell of the home isn't absolutely necessary, wants to give cash offer without a selling contingency, and upon sale of home it will be used to pay for new house.
But in scenario that the sale takes longer than closing of new home, he is able and willing to pay a mortgage/loan installment until the house sells.

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I bought my second rental home with a bridge loan from Jay with ags reward, the sponsor on this site. It was incredibly easy and I believe the cost was 1%, then I just refinanced when I moved and had a signed lease on the house i just moved out of. It us a great product and I was all set to use it again a few months ago but I rolled the dice and listed my house and got a lease signed on it before the deadline for converting tional financing on a home I bought.

I am pretty sure Jay can close a bridge loan in just a couple of weeks if you need to, if that matters.

62strat said:

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jja79 said:

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My email is on my profile if you'd like a referral to one of our bankers in the Magnolia area that could discuss a HELOC with them.

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can you tell me about a bridge loan? A brief read sounds like it's what my dad is looking for.

Owns home outright and is roughly the value of the house they want to buy, has liquid funds that cover cost of home to purchase, so a sell of the home isn't absolutely necessary, wants to give cash offer without a selling contingency, and upon sale of home it will be used to pay for new house.
But in scenario that the sale takes longer than closing of new home, he is able and willing to pay a mortgage/loan installment until the house sells.

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So do they have the liquid funds to cover the purchase of new home or not? You say they have "liquid" funds but then talk about taking out loans from retirement savings or needing a bridge/HELOC loan to cover the cost of new home so that the purchase isn't contingent on the sale of current home. Retirement funds aren't considered liquid funds, and there's penalties for withdrawing them.

PM me the address and some pics if you have them and I can give you an estimated sales price. I'd love to help them.

txaggie_08 said:

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62strat said:

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jja79 said:

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My email is on my profile if you'd like a referral to one of our bankers in the Magnolia area that could discuss a HELOC with them.

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can you tell me about a bridge loan? A brief read sounds like it's what my dad is looking for.

Owns home outright and is roughly the value of the house they want to buy, has liquid funds that cover cost of home to purchase, so a sell of the home isn't absolutely necessary, wants to give cash offer without a selling contingency, and upon sale of home it will be used to pay for new house.
But in scenario that the sale takes longer than closing of new home, he is able and willing to pay a mortgage/loan installment until the house sells.

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So do they have the liquid funds to cover the purchase of new home or not? You say they have "liquid" funds but then talk about taking out loans from retirement savings or needing a bridge/HELOC loan to cover the cost of new home so that the purchase isn't contingent on the sale of current home. Retirement funds aren't considered liquid funds, and there's penalties for withdrawing them.

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penalties for withdrawing from 401k? He's 72, I believe he is currently pulling out monthly, in addition to pensions and SS.

He doesn't want to pull out $1m of his IRA/401k to fund a house purchase and pay that tax, and then a few months later sell the house and put the $1m back in…
He would be out that huge tax bill.

He wants to pay for the house with the sale of his home, but in a scenario where his house hasn't sold yet, this is where a bridge loan scenario comes into play. He has collateral (paid off house or retirement accounts) and is willing to pay a handful of monthly loan installments/interest/ etc.

At the same time he doesn't want to put in a cash offer that is contingent on sale of home.

Maybe I'm not explaining it all very clearly, although, again, when reading about bridge loans it seems to describe his situation and needs to a tee.

He did get appraisal on existing home; it is 20% more than the house they want to buy.

On the bridge loan that my parents got back in the early 2000's when they downsized, I think they only paid the interest for the 3 months until their old house sold. When going thru things after my Dads passing, I found his little handwritten notes of his payments & the payoff. I miss seeing his printing - it was perfect.

Side note: when he paid off the new house he never took the paperwork to the county, so there was still a recorded lien. We couldn't find any of the records when Mom sold a few years ago and their loaning bank had been sold to another & they didn't have a record showing it. Thank goodness for a small town & having good relationships with lots of people - everyone agreed that it had been paid off & the lien was released allowing her sale to go thru.

For what it's worth Jay handled a bridge loan for me back in 2014, slightly different circumstances but similar end result. In the end it worked out well. I personally know OP extremely well and have let him know about my positive experience with Jay many years ago.