Another fintech that has been quietly growing in the mortgage space is looking to solve the age-old “buy before you sell” conundrum.
The main challenge facing potential buyers these days is unloading their old property while securing a new home.
The problem is exacerbated by a continuing shortage of for-sale inventory, coupled with declining affordability thanks to rising home prices and mortgage rates.
This may make it difficult to come up with two mortgage payments while finding a buyer for their old home.
Enter Calque, which partners with local mortgage lenders to ensure your home loan problem is solved.
Commercial Mortgage in Calque
The Austin, Texas-based company offers two products to make it easier to buy and sell a home at the same time.
So-called “commercial mortgages” allow home sellers to access their home equity early without having to sell first.
This second mortgage acts as a bridge loan, freeing up liquidity so you can make a stronger offer.
It comes with a guaranteed back-up offer where Calque will buy your old home, allowing you to make cash-like offers.
This gives buyers increased purchasing power in many different ways, whether that’s a higher down payment, larger cash reserves, or the ability to pay off other high-cost debt.
It can also make the buyer more competitive in a housing market that continues to suffer from low inventory.
If you find yourself in a bidding war, having a larger down payment can help you win the property over other bidders.
Even if the competition isn’t strong, a larger down payment may allow you to make a lower-priced offer, as the seller will prefer the offer with more money.
Additionally, you can offset the cost of a higher mortgage rate on the replacement property by saving more money.
A few months ago, a friend of mine sold his old house with a very cheap mortgage and used the proceeds from the sales to pay off his new high-interest mortgage.
While this was a good solution to reduce interest expenses, it did not reduce the mortgage payments, which were still naturally amortized despite the extra payment.
This means that he will either need to request a loan recast to reduce future payments, or he will need to wait for a good opportunity to apply for a rate and term refinancing.
The Trade-In Mortgage program allows you to apply a larger down payment to the new home upfront before you sell your old home.
As a result, you won’t necessarily need to refinance or complete a recast since the lower monthly payments will be reflected in the smaller loan amount.
You may also be able to get a lower interest rate on your mortgage thanks to a lower loan-to-value (LTV) ratio, and/or avoid private mortgage insurance (PMI) in the process.
And you can use some of the money from the bridging loan to fix up your old house so it sells for a better price!
Calc buster for emergency
Recently, Calque introduced a “lighter” pre-sale call option known as the “Contingency Buster.”
It allows homebuyers to achieve the same basic score without taking out a second mortgage.
In the process, they can make offers without any home sale contingencies and exclude old mortgage payments from their P/I ratio.
As long as your lender is approved to work with Calque, you can make an unconditional offer on a new home without worrying about having to qualify for two mortgages.
It’s hard enough to afford one mortgage, so trying to come up with two right now will likely be a deal breaker for most people.
As with a commercial mortgage, the Contingency Buster leverages the company’s Purchase Price Guarantee (PPG).
It is a binding reserve offer that is put in place and will only be used if your current home does not sell within 150 days.
The agreed upon price will likely be below market price, with the typical calculator on their website showing 70% or 80% of the estimated value offer.
So obviously you still want to sell your house on the open market to a buyer other than Calc.
How much does your calculus cost?
There are three possible fees depending on the program you choose.
This includes a flat fee of $2,000 paid to Calque, plus 1% of the purchase price escrow amount.
For example, if they offer to buy your old house for $600,000, the amount will be $6,000 + $2,000, or $8,000 total, taken from your sales proceeds.
If you need the bridging loan to access your shares in advance through the Trade-In Mortgage program, there is also a flat fee of $550. The interest rate appears to be 8.5% on this loan.
So you’ll pay some interest until you close on the new house and can pay off the bridge loan with the proceeds.
Those who use Contingency Buster simply will only owe $2,000 plus 1% of the offer price. This appears to be the case whether they sell the property on the open market or not.
Is this a good offer?
Whenever I come across programs like this, I try to determine if it’s a good deal or not.
Ultimately, many potential homebuyers cannot purchase a new home without it being contingent on selling their old home.
It is impossible for many people to hold two mortgages from a qualification standpoint.
And even if they could, there’s also uncertainty about whether an old house will remain stuck on the market and continue to incur that cost.
From this perspective, this alleviates those problems and concerns. But as mentioned, there are costs associated with the software.
The biggest potential cost is selling your home for only 70% or 80% of its value. While other fees seem reasonable, selling for a 20-30% haircut isn’t great.
In other words, Calque may be beneficial, but you still want to sell your old home to an outside buyer for top dollar (or as close to it as possible).
Otherwise, you may be leaving a lot of money on the table. This kind of defeats the purpose of using the program to begin with.
For me, this means understanding up front how easy it is to sell your current home and at what price to avoid any unwanted surprises.
Finally, you will need to use an approved mortgage lender to work with Calque. So you will also need to make sure that this lender is efficient and has good rates!
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My work experience in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and current) homebuyers better navigate the home loan process. Follow me on Twitter for hot takes.
Source link
