Bridge Loan
Highlights of the
Bridge Loan
(1) Fast access to funds, allowing you to buy a new home before selling your current one (2) Designed to be temporary (usually 6-12 months), giving you time to sell your existing home (3) Flexible repayment terms
Eligibility
Here are some of the eligibility requirements for the Bridge Loan program. Select ‘Get Started’ to check if you’ll be a good fit.
Typically need at least 20% equity in your existing home to qualify since the loan uses that equity as collateral
Most lenders require a credit score of at least 620-680
Lenders prefer a DTI ratio below 50% to ensure you can manage payments on both properties during the transition period
Lenders often want a clear plan or timeline for selling your current home since the proceeds will repay the bridge loan
An appraisal is typically required to verify the market value of your existing home
Some lenders may still require a portion of the down payment from your own funds
Common Questions
How does a bridge loan work?
A bridge loan provides short-term financing to help you buy a new home before selling your current one. The loan is typically repaid once your existing home sells.
How long do I have to repay a bridge loan?
Most bridge loans have a term of 6 to 12 months, but some lenders may offer extensions if needed.
Do I make payments on a bridge loan?
Some bridge loans allow interest-only payments during the term, while others may defer payments until your current home is sold.
What happens if my home doesn’t sell before the loan term ends?
If your home doesn’t sell within the loan period, you may need to refinance, extend the loan, or explore other repayment options to avoid default.
How much can I borrow with a bridge loan?
The amount is typically based on a percentage of your home’s equity, often up to 80% of the combined value of both properties.
Are there any risks with a bridge loan?
Yes, if your home doesn’t sell within the expected timeframe, you could face higher costs, potential default, or the need to carry payments on both properties longer than anticipated.
Do I need to have my current home listed for sale before applying?
Some lenders may require proof that your home is actively listed for sale before approving a bridge loan.
Other Info
Higher Interest Rates and Fees
Bridge loans typically have higher interest rates than conventional loans
Short-Term Commitment
Bridge loans are designed as a temporary solution and are not meant for long-term financing. Be prepared to repay the loan quickly, usually within 6-12 months.
Potential for Refinancing
If your home doesn’t sell as expected, you may need to refinance or extend the bridge loan, which can add more costs and prolong the repayment period.
Tax Implications
Interest paid on a bridge loan may not be tax-deductible, depending on your situation, so it’s best to consult with a tax advisor.