Hey team, hope you’re doing well. As we move into fall and winter approaches, I wanted to revisit the topic of bridge financing. I’ve recently helped a couple of clients with bridge loans, situations where they needed to buy before selling their current home or wanted to keep their existing property while accessing its equity. A bridge loan allows you to make a non-contingent offer on a new property by pulling equity from your current home to use as the down payment. It’s really that simple.
The best part about the bridge loans I’m seeing now is that they often come with no monthly payments. They’re structured with a short-term balloon, meaning the client doesn’t make payments on the bridge financing during that period. Additionally, this setup allows the buyer to qualify based solely on the new home, without needing to count the payment on the existing home or the bridge loan.
For example, say someone’s current home is worth $1 million and they owe $300,000, giving them about $700,000 in equity. They want to buy a new home for $1.5 million and plan to keep the new mortgage around $850,000. By using a bridge loan, they can access around $400,000 from their existing home either paying off the old mortgage or leaving it as is, depending on what works best. Combined with $250,000 in cash, that gives them $650,000 toward the purchase, leaving an $850,000 mortgage balance.
It’s a simple and flexible solution with several variations, depending on the client’s needs. The key takeaway is that if someone has equity in their current home, they can buy before they sell, easing the stress of timing the transition. If you have any clients or scenarios like this, please reach out. I’d love to help. Have a great fall, and thanks for watching.
