Another fintech has been quietly growing in the mortgage space, looking to solve the age-old “buy before sell” conundrum.
The biggest challenge for those looking to relocate these days is getting rid of their old belongings while finding a new place to live.
Exacerbating the issue is the continued lack of real estate, coupled with reduced affordability due to high home prices and mortgage rates.
This can make it difficult to float two mortgage payments while finding a buyer for their old home.
Enter Calque, which partners with local lenders to ensure that a piece of the home loan is solvable.
Calque’s Trade-In Mortgage
The Austin, Texas company offers two products to make it easier to buy and sell a home at the same time.
A so-called “Trade-In Mortgage” allows home sellers to gain access to their home’s equity early without the need to sell first.
This second loan acts as a bridge loan, freeing up cash to make a solid offer.
It also comes with a guaranteed offer to back up when Calque will buy your old home, allowing you to pass on cash-like offers.
This gives consumers increased purchasing power in many different ways, whether it’s an increased down payment, larger savings, or the ability to pay off more expensive debt.
It could 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, coming in with a big down payment can help you win the spot over other bidders.
Even if the competition is not strong, a large down payment may allow you to make a low bid offer, as the seller will prefer an offer with a lower additional fee.
Additionally, you can offset the cost of a higher mortgage rate on a convertible by putting more money down.
A few months ago, a friend of mine sold her old home for a bargain and used the sale proceeds to pay off a new mortgage.
Although this was a good solution to reduce his interest costs, it did not lower his mortgage payments, which still paid off regularly despite the additional payment.
This means that you will need to request a loan repayment to reduce future payments, or you will need to wait for a good opportunity to apply for a rate and repayment period.
A Trade-In Mortgage allows you to put a down payment on a new home before you sell your old one.
As a result, you will not have to refinance or complete a refinance as the lower monthly payments will be reflected in the smaller loan amount.
You may even be able to get a lower loan amount due 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 bridge loan to fix up your old home so it can sell for a better price!
Calque’s Contingency Buster
Recently, Calque rolled out an “easy” buy-before-you-sell feature known as the “Contingency Buster.”
It allows home buyers to get the same basic result without taking out a second mortgage.
In this process, they can make an offer without the contingencies of a home sale and deduct the old mortgage payment from their DTI balance.
As long as your lender is approved to work with Calque, you can make an independent offer on a new home without having to worry about qualifying for two mortgages.
It’s hard enough to pay off one loan, so trying to float two in the meantime could be a deal breaker for many.
Like Trade-In Mortgage, Contingency Buster uses the company’s Purchase Price Guarantee (PPG).
It is a binding backup offer set to be used only if your current home does not sell within 150 days.
The agreed price will probably be below market, a sample calculation on their website shows 70% or 80% of the estimated price offered.
So obviously you still want to sell your home on the open market to a buyer outside of Calque.
How Much Does Calque Cost?
There are three possible fees depending on which program you choose.
This includes a $2,000 down payment paid to Calque, and 1% of the Purchase Price Guarantee amount.
For example, if they offer to buy your old home for $600,000, it will be $6,000 + $2,000, or $8,000 in total, taken from your sales proceeds.
If you needed a bridge loan to reach your home equity early through the Trade-In Mortgage program, there is also a flat fee of $550. And the interest rate is apparently 8.5% on that loan.
So you will be paying some interest until you close on the new home and be able to pay off the bridge loan with that interest.
Those who use Contingency Buster will only owe $2,000 plus 1% of the purchase price. This seems to be the case whether they are selling the property on the open market or not.
Is This A Good Offer?
Whenever I come across programs like these, I try to decide if they are a good investment or not.
Ultimately, many prospective home buyers cannot purchase a new home unless it is contingent on the sale of their old home.
It is not possible for most people to carry two debts from a degree perspective.
Even if they couldn’t, there’s also the uncertainty of whether the old home sticks on the market and continues to bear those costs.
So in that sense, this alleviates those problems and concerns. But as noted, there are costs involved in this process.
And the biggest possible cost is selling your home for 70% or 80% of its value. While some fees sound good, selling 20-30% hair isn’t great.
In other words, Calque can be profitable, but you still want to sell your old home to a third-party buyer for top dollar (or as close to it as possible).
Otherwise you could be leaving a ton of money on the table. And it defeats the purpose of using the program to begin with.
For me, this means understanding early on how easy it will be to sell your current home and at what price to avoid any unwanted surprises.
Finally, you will need to use a mortgage lender that is licensed to work with Calque. So you will also need to make sure that this lender is competent and has a good price!
Before creating this site, I worked as an account manager for a real estate broker in Los Angeles. My experiences in the early 2000s inspired me to start writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the mortgage process. Follow me on Twitter for the latest.
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