Bridge loans are a tool that can help an existing homeowner buy their next home before they sell their current home. In today’s competitive real estate market, Sellers typically won’t accept offers that are contingent on the sale of a Buyer’s existing home – so a bridge loan can be a crucial tool for getting your offer accepted.
A bridge loan is a special-purpose refinance of your existing home loan. It’s special because everyone involved (you and the bridge loan lender) knows that the bridge loan is intended to be temporary. A bridge loan allows you to extract some of the equity from your existing home prior to selling it so that you have money for the down payment on the new home.
In what states are bridge loans available?
Accunet’s most popular bridge loan money source (a credit union) will make bridge loans on primary residences located in southeast Wisconsin and certain counties in northern Illinois. We have another bridge loan lender that covers the same northern Illinois and southeast Wisconsin area, and a third who will lend in Minnesota.
We currently do not have any bridge loan lending coverage for Florida properties, the fourth state in which Accunet lends. Accunet will facilitate getting all of your income and credit documentation to the bridge loan lender with your permission, but we won’t be directly involved in lending the money like we are on the mortgage for your new home.
Key features of our most popular bridge loan lender’s product:
- Borrow up to 80% of the listing price or real estate agent’s opinion of value on your current primary residence (subject to bridge loan lender’s judgement as to if the value is reasonable). An appraisal is required for bridge loan amounts over $250,000.
- The bridge loan must pay off all existing mortgages on the property.
- Closing costs are usually between $800 and $1,200 depending on whether an appraisal is needed and the cost of title insurance for the loan size.
- There are NO monthly payments, but the interest is due and payable at the end of 6 months or when the existing home sells, whichever occurs first.
- If the existing home doesn’t sell in the first 6 months of the bridge loan, you may be able to renew the bridge loan for another 6 months for an additional fee.
- The monthly interest cost of the bridge loan, along with the monthly property tax and insurance expense on the existing home, is factored into your pre-approval to buy the new home – even though you’re not making actual monthly payments on the bridge loan.
- Money / proceeds from the bridge loan are not available until the third business day following the bridge loan closing, because the bridge loan is a refinance of your primary residence. Federal regulations require borrowers be given a 3-day right to rescind (cancel) the refinance of their primary residence.
Accunet’s bridge loan partners all have different requirements and terms for the bridge loans they offer. For example, another bridge loan lender requires a borrower to pay the interest due each month. All bridge loans take time to put together so it’s best to get pre-approved for the bridge loan as part of the overall pre-approval process.
Not every homeowner can qualify to carry two monthly mortgage payments (including taxes and insurance on both the new and existing home), and others simply don’t want to. In those cases, the only way to write an offer without a sale of home contingency is to sell the existing home first, and then rent or move in with relatives while searching for the next home.
The key is to know all your options. Crossing the bridge from your existing home to your new home can be a financial puzzle that seems hard to solve. But Accunet has the best puzzle solvers in the mortgage industry with a full set of tools in our mortgage tool box to solve the puzzle.