A bridge loan is a short term loan that uses the equity in your current home to help you buy your next one before the first home sells. It can let you make an offer without a home sale contingency, which makes your offer more attractive to sellers.
How does a bridge loan work?
The lender advances money against the equity in the home you own, and you use it toward the down payment on the new home. When your current home sells, the sale proceeds pay off the bridge loan. These loans usually run for months, not years.
Who is a bridge loan good for?
It suits homeowners with solid equity who have found their next home and do not want to wait or move twice. It is common for move up buyers and for people downsizing who want to settle into the new place before listing.
What are the costs and risks?
- Bridge loans often carry higher rates and fees than a standard mortgage.
- You may carry two housing payments until the first home sells.
- If your home takes longer to sell than planned, the costs add up.
What are the alternatives?
Ask your lender to compare a bridge loan with a home equity line of credit, an offer contingent on selling your home, or selling first and renting for a short time. The right choice depends on your equity, your income and how competitive the market is.
Planning a move up or a downsize?
Molly can help you time the purchase and the sale and connect you with trusted lenders. Call 206-498-4137, check your home’s value, or search homes for sale.