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Bridge Loans
Buy Before You Sell – Buy, Move, Then Sell!
Use funds from the equity of your current house toward the purchase of the new home, without selling first
Buy Before You Sell Bridge Loans are a short-term financing option used by homeowners to cover the gap between the purchase of a new home and the sale of their existing property. Bridge Loans provide temporary liquidity, up to $2,000,000, allowing current homeowners to make a down payment or cover closing costs on the new property without first having to sell their current home.
Buy Before You Sell Bridge Loan Program Benefits
- Make a Non-Contingent Offer, by removing the Pending Sale Contingency when making an offer, increasing your odds of having the Seller accept your offer
- Increase your purchasing power by removing the mortgage liability of the current home from the debt-to-income ratio calculations
- 0% interest Bridge Loan can be used as down payment on new purchase, as well as towards minor repairs/upgrades of the current home, and mortgage payment coverage for the current home
- Buy your new home before you sell your current home (funds from Bridge Loan are used for closing on the new home before the current residence is sold)
- Avoid having to move twice by being required to sell your current home prior to closing on the new home
- Work with your Realtor of choice, provided the sale of your house occurs within 210 days of closing on your new home
- After you move out of your current house your Realtor can stage your house, and have perspective buyers view it at their convenience
- No upfront costs. Only pay if you use the Bridge Loan, with the Bridge Loan cost coming from the proceeds of the sale of your current home
How Does The Buy Before You Sell Bridge Loan Work
- Step 1: The Loan Officer and your Realtor will provide documentation necessary to obtain approval for the Bridge Loan
- Step 2: The Lender will provide the amount of equity available or Equity Unlock
Example:
- Expected Sales Price: $500,000
- Outstanding Mortgage Balance(s): $250,000
- Loan Payoff Value: Estimated at 75% of Expected Sales Price
- 0% Interest Rate Equity Unlock: $500,000 * .75 – $250,000 = $125,000
- Loan Payoff Value: $250,000 + $125,000 or $375,000
- Step 3: Homebuyer starts shopping for their new home and making contingency free offers
- Step 4: Close on new home/mortgage moving in immediately, using all or a part of the Equity Unlock toward the down payment
Example:
- New Purchase Price: $600,000
- Down Payment: $125,000 (full Equity Unlock)
- New Mortgage: $475,000
- Step 5: Sell at Full Market Value
- List current home within 10 days of closing on the new home
- The Listing Agent has 210 days to sell your current house, from the purchase date of the new house, during which time the Listing Agent will market the house with the goal of obtaining the maximum sales price. Important milestone dates are as follows:
- Provided the current house is sold within 90 days of the settlement date on their new home the Bridge Loan is closed out
- If the house does not sell within 90 days, the lender will purchase the home based on the predetermined Loan Payoff Value, at which point a four Month Upside Protection period is initiated. During this time the Listing Agent continues to market the property and provided the property is sold within four months, the property owner will receive the proceeds of the transaction less the Loan Payoff Value, list, cost to hold and sell the current home
- The greater of 2.40% fee charged based on the sales price of your home or $9,000 paid out at closing
Buy Before You Sell Bridge Loan Scenarios
With the Buy Before You Sell Bridge Loan, once your non-contingent offer to purchase a house is accepted, at which point:
- Your current home sells before you close on your new home, and you use the proceeds from the sale of your departing residence toward the purchase of the new house. Since you never used the bridge loan to cover the downpayment, the bridge loan is never created, you do not owe the lender the flat fee associated with the bridge loan
- You settle on your new home with the assistance of a bridge loan being applied toward the down payment. You list your house for sale and sell your departing residence within 90 days, at which point the bridge loan is closed out, you receive the proceeds from the sale of your house, less the following amount:Â bridge loan fee of the greater of 2.4% of the sales price of your home or $9,000, the loan payoff balance from the departing residence mortgage balance, and the Equity Unlock amount
- You settle on your new home with the assistance of a bridge loan being applied toward the down payment. You list your house for sale but do not sell your departing residence within 90 days.  The lender will purchase your home for a predetermined Loan Payoff Value. Your listing agent is still assigned to the listing for another 120 days during which time the house is sold. You will receive the excess if the house is sold for more than the predetermined Loan Payoff Value, less the cost of holding the property, such as property taxes, homeowner insurance, and HOA fees
- You settle on your new home with the assistance of a bridge loan being applied toward the down payment. You list your house for sale but don’t sell your departing residence within 210 days. The lender no longer has any financial obligation to you, nor do you have any financial obligation to the lender should the property be sold for less than what the lender provided to you based on the Loan Payoff Value
