In its simplest form, relocation loans are used to purchase your next property before you have sold your existing property. Relocation loans require equity in your existing property. Without equity, relocation loans will not work.
There are three main terms that are important to relocation loans:
- Start Debt is the purchase price plus costs, added to the existing loan that you have.
- Peak Debt is the Start Debt, plus any interest that accrues through the Relocation period.
- End Debt is the debt that is left after you sell you existing home and pay the Peak Debt down.
Occasionally a customer will have a No End Debt, relocation loan. This is where the sale of the existing home will completely cover the purchase price and the costs of the purchase, typically when downsizing.
Benefits of a Relocation loan
- You get to purchase your new home before selling the old one. This generally happens with unplanned purchases such as a dream home coming on the market.
- Not only can you purchase before selling, but also move in! This means you do not have to do the two moves that selling and then renting will cause.
- When you buy land and build, staying in your existing home would be less stressful.