Here’s how a bridge loan can help sellers sell and buy a home seamlessly.

Is the thought of selling your home before finding a new one causing your stress? Do you need the proceeds from the sale of your current home to purchase a new one? If you answered yes to either question, then a bridge loan may be a stress-free option that works for you.

A bridge loan is a short-term mortgage that allows a homeowner access to the equity in their current home so that they can purchase a new one. You’ll have six to 12 months to sell your old home after you’ve purchased your new one. Aside from that, bridge loans typically work in one of two ways.

The first way is to use the bridge loan as a first mortgage. One large loan will be taken out for up to 80% of the home’s value. Those funds are used to pay off the current mortgage balance, and the money leftover can be applied to a down payment on the new home.

“The most significant advantages of using a bridge loan are convenience, flexibility, and competitiveness.”

For example, if your current home’s value is $300,000 and you only owe $200,000, the max bridge loan amount you can get is $240,000. That means you can use $200,000 to pay off your mortgage, and you’ll have $40,000 available as a down payment.

If used as a second mortgage, the homeowner borrows the difference between their current loan balance and 80% of the home’s value, or $240,000 in this example. Your current loan remains unchanged, and the second mortgage funds of $40,000 can be applied to the down payment on the new home.

As a seller, the most significant advantages of using a bridge loan are convenience, flexibility, and competitiveness. If you need to move quickly due to a job relocation or a change in your living situation, a bridge loan offers convenience by having funds available to purchase your next home before you’ve sold your current one. In this strong seller’s market, most sellers won’t wait for your current home to sell. A bridge loan eliminates the need for a home sale contingency, which will make you even more competitive.

If you’re ready to sell, have equity in your current home, and want to know more about bridge loans, give me a call or send an email. I’ll connect you with a lender who will walk you through your options to see if a bridge loan is right for you.