Worried a home sale contingency will make your offer weak? You can use a bridge loan to leverage the equity in your current house to make a strong, noncontingent offer on your new home.
Navigating the homebuying gap: The “buy-and-sell” challenge.
You’ve found the house of your dreams, ideally located in the desired school district and offering the perfect amount of space for your family. However, several obstacles are preventing you from making a decisive move in today’s competitive real estate market:
For Example:
- Trapped equity: Your down payment is tied up in your current home’s equity, leaving you feeling cash poor when you need to act fast.
- A weak offer: An offer contingent on selling your home often ends up at the bottom of the pile, especially when sellers have other options.
- Stress and risk: You’re facing the logistical challenge of perfectly timing a sale and a purchase. You fear you’ll either lose your dream home or have to accept a lowball offer on your current house just to make the deal work.
How does a bridge loan work?
A bridge loan is a short-term loan that “bridges the gap” between buying your new home and selling your old one. It’s a simple but powerful tool that lets you tap into your current home’s equity before you sell it, giving you the funds you need for your down payment on your new house. This allows you to avoid the need for immediate permanent financing on the new property until your current home is sold.
Core benefits of a bridge loan.
A bridge loan isn’t just about financing; it’s about giving you control over your entire homebuying journey. It’s the key to reducing stress and achieving a better outcome for you and your family. Here are the benefits you get from a bridge loan.
- Winning the offer: Stand out from the competition. By eliminating the home sale contingency, you present a stronger offer and improve your negotiating position with sellers.
- Removing the rush: Sell your current home on your timeline. With no purchase deadline for your new home, you can avoid the stress of accepting a lowball offer in haste.
- Avoiding a double move: Move directly from your old home to your new one. Skip the expense and hassle of temporary housing, storage units, or living with relatives while waiting for your old house to sell.
Why partner with us?
Choosing a loan option is about more than finding the lowest interest rate; it’s about finding a partner you can trust — just like Directions Home Loan. Unlike big, impersonal lenders, we’re your local experts dedicated to your success.
- Local market mastery: With over 17 years of experience, we offer expert and targeted advice on everything from timing to closing costs — insights that a national call center just can’t provide.
- Personalized guidance: We’ll pair you with a dedicated loan officer who’ll guide you through every step, from managing monthly payments to navigating the sale of your previous home, minimizing risk and maximizing your peace of mind.
- Extensive financial network: We work with various financial institutions to find you the best bridge loan options and terms.
An investment, not an expense.
While bridge loans typically come with associated costs, you should first consider the higher costs of not using one. Yes, bridge loans usually have higher interest rates compared to conventional loans or permanent financing. However, the option for interest-only payments during the initial period can significantly ease your financial burden, so the benefits often outweigh the costs.
Despite their many benefits, it would be irresponsible not to consider the cons of bridge loans. These include managing both your new and current mortgage (if applicable) or potentially incurring private mortgage insurance if your equity falls below a certain threshold. However, depending on your needs, the flexibility and competitive advantages of a bridge loan could edge out the drawbacks.
Ask yourself:
- What is the cost of losing out on the perfect home in the right school district?
- How much money could you lose by accepting a lowball offer on your current home?
- What is the financial and emotional cost of months in temporary housing and storage fees?
Bridge loan insights and resources
Our blog is your go-to resource for the latest information on VA home loans, market trends, and tips for veterans and service members. From explaining your loan benefits to simplifying the closing process, we provide valuable insights to empower your homeownership journey.
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Frequently Asked Questions
What happens if my current house doesn’t sell as quickly as I planned?
This is a common concern, and it’s where our local expertise becomes your greatest asset. We’ll work with you to develop a tailored financial strategy based on current market conditions. Most bridge loans are structured around a set term of 6–12 months to sell your home, providing a comfortable buffer. Your loan officer will guide you throughout the process.
How much can I borrow with a bridge loan?
The amount you can borrow can vary depending on the equity you have in your current home. Most lenders, including financial institutions like ours, allow you to borrow a combined total of up to 80% of your current home’s value and your new home’s value. We’ll help you calculate the exact amount you can access.
What are the general qualifications for a bridge loan?
To qualify for a bridge loan, lenders generally look for a good credit score, verifiable income, and significant equity in your current property. Because you may be carrying two mortgages for a short time, we’ll also assess your ability to manage the monthly payments until your original home sells.
How long does the approval process take with Directions Home Loan?
As we are a local lender with an in-house team, our process is often faster and more efficient than that of large national banks. Additionally, we prioritize clear communication to ensure your bridge loan closes on a timeline that empowers you to make a competitive and timely offer.
When do I start paying back the bridge loan?
With most bridge loans, you start paying interest-only payments during the loan term, which helps manage cash flow while you own both properties. The full loan amount, often called a balloon payment, is usually due once your current house sells, allowing you to pay off the bridge loan and transition smoothly to your new mortgage.
How are you different from a big online lender or my bank?
Yes, absolutely. A bridge loan is specifically designed to unlock the equity in your current home before it sells. This capital can be used for various purposes, including your down payment on a new home, closing costs, or other immediate financial needs that arise during the transition period.
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Ready to make a winning offer?
Stop worrying about contingencies and start planning your move. Let our local experts create a custom loan plan that unlocks your home equity and secures your family’s future. Take the first step — talk with us to see if a bridge loan is right for you.
