Georgia Homeowners: Unlock Equity and Buy Before You Sell with a Bridge Loan

These benefits collectively position a bridge loan as a practical and strategic choice for Georgia homebuyers who may be financially stretched before selling their previous property. With a bridge loan, the proceeds from the sale of your old home can comfortably cover the loan repayment.

What are the drawbacks of a bridge loan?

Bridge loans, while offering flexibility and solutions in certain situations, also come with their own set of challenges:

These drawbacks highlight the importance of carefully considering your financial situation and consulting with a financial advisor before opting for a bridge loan.

When is a bridge loan a good solution?

A bridge loan may not be the universal answer for all real estate deals, but in certain circumstances like the ones listed below, it can significantly ease the transition from an old home to a new one.

• You need the equity from your current home for the new home’s down payment.
• You avoid the costs and hassle of a double move and temporary housing.
• You need to act fast before another buyer gets your dream home.
• You plan to remove home sale contingencies in your offers, which are hindering your buying process.
• You decided to sell an empty and properly staged home, which can be more profitable and easier.

A bridge loan is especially relevant if you’re unable to prepare or stage your current home for sale while still residing in it. It gives you the financial freedom to move out and showcase your home in the best light, potentially leading to a faster sale and better offers.

What’s required to get a bridge loan in Georgia?

To be eligible for a bridge loan in Georgia, you generally need to meet these key criteria:

• Qualifying income: Lenders will assess your income to ensure you can manage payments on your existing mortgage, new mortgage, and potential bridge loan interest.
• Sufficient equity: It’s essential to have at least 20% equity in your current home. Some lenders might ask for as much as 50%.
• Good credit history: A good credit score, typically above 650, is crucial for approval. This score affects your interest rate and other loan terms.
• A currently listed home: While not always mandatory, some lenders require proof that your current home is on the market, helping to ensure its sale within the bridge loan’s duration.

How much does a bridge loan cost in Georgia?

In Georgia, the cost of a bridge loan generally exceeds that of a standard mortgage. Expect interest rates to be 1 to 3 percentage points higher than typical mortgage rates. Alongside higher interest rates, bridge loans come with additional transaction fees.

This increased cost reflects the lender’s heightened risk, considering the uncertainty of when your current home will sell. It’s important to be financially prepared to manage mortgage and bridge loan payments, particularly if your home doesn’t sell within the anticipated timeframe.

Your specific interest rate will largely depend on your credit score and the lender you choose.

How to reduce bridge loan costs

Consolidating your bridge loan with your new mortgage under the same lender can save you from additional underwriting and other mortgage fees. Both loans can be underwritten and approved simultaneously, offering potential savings.

Shopping around is key. Bridge loans are meant as a short-term fix, so it’s vital to choose an option that not only suits your financial needs but also offers convenience and aligns with your specific circumstances. We’ll explore more financing options in a subsequent section.

Bridge loan cost example

Below is an example of how much a $200,000 bridge loan might cost, along with possible fees.

You find a home you’d like to purchase, but you’re still waiting for your current Georgia house to sell. The new home’s asking price is $350,000. You can only come up with $150,000, but you have at least another $200,000 worth of equity in your current property. You want to access that money to cover the shortfall before your new home is sold to another buyer.

*These closing costs typically range between 1.5%-3% 

Who provides bridge loans in Georgia?

In Georgia, the availability of bridge loans may be somewhat limited due to the specific underwriting requirements associated with this type of loan. If you’re considering a bridge loan, it’s advisable to explore options with various lenders. The most common sources for bridge loans in Georgia include:

• Your mortgage lender
• Local banks
• Credit unions
• Hard-money lenders
• Non-qualified mortgage (non-QM) lenders

Additionally, some modern real estate companies specialize in facilitating bridge loans, simplifying the process of bridging the gap between buying and selling a home. More details on this will be covered later in the post.

Are there alternatives to bridge loans in Georgia?

While a bridge loan might not work for every Georgia homeowner’s unique situation, there are alternatives to consider:

• Home equity loan: This kind of loan (often called an HEL) allows you to borrow money using the equity in your home as collateral. Interest rates for a home equity loan can be more expensive than your current rate on your first mortgage, but instead of completing a cash-out refinance (paying off the first mortgage and borrowing cash), you can just borrow the money you need at the higher interest rate and leave your first mortgage of at its lower rate.
• Home equity line of credit (HELOC): Another option to use your existing equity is a HELOC. This allows you to pull money out of your property for a relatively low interest rate. Instead of receiving the money all at once, your lender will extend a line of credit for you to borrow against. You might, however, have to pay an early closure fee if you open this line of credit and close it very soon after. Unlike a home equity loan, HELOCs typically have adjustable interest rates.
• Cash-out refinance: This type of loan lets you pull cash out of your home while refinancing your previous mortgage at the same time. Interest rates are typically higher for these kinds of loans compared to regular refinances but are lower than those for bridge loans. This is not a solution for everyone, though. For example, you cannot do two owner-occupied loans within one year of one another. This would mean that you might have to wait longer to finance your new purchase with an owner-occupied mortgage using the cash from your cash-out refinance.
• 80-10-10 (piggyback) loan: This option is called a piggyback loan because you would be taking a first mortgage and second mortgage out at the same time to fund your new purchase — this means that you would only need 10% down. For buyers who can’t make as large of a down payment before selling their previous home, this could be a solution that helps them avoid the cost of mortgage insurance. You would, however, still be carrying the cost of three mortgage payments until you sell your current home and can pay off the second mortgage.
• A 401k loan: Borrowing against your retirement account comes with some benefits and drawbacks — your repayment period will be relatively short (up to 5 years), and your monthly payment will likely be high. This could affect your ability to qualify for your new mortgage, as your lender will need to include this monthly payment when calculating your debt-to-income ratio. If your 401k plan allows, you might be able to borrow up to $50,000 to put toward your new purchase.

Are there modern ways to buy a house before I sell?

With today’s technology, there are real estate solution companies like HomeLight that incorporate bridge loans into convenient programs that streamline the process of buying and selling a house at the same time in Georgia. These “Buy Before You Sell” programs can provide a more complete “bridge” to help you successfully complete your move to a new home, thereby reducing stress and worry.

Together with your Georgia agent, HomeLight can help you move into your new home with speed and certainty, while helping you get the strongest possible offer for your old home.

Examples of other “Buy Before You Sell” or home trade-in service companies include Knock, Orchard, Flyhomes, and Homeward.

How does HomeLight Buy Before You Sell work?

Here is how HomeLight’s Buy Before You Sell program works for home sellers in Georgia:

1. Apply in minutes with no commitment: Find out if your property is a good fit for the program and get your equity unlock amount approved in 24 hours or less. No cost or commitment is required.

2. Buy your dream home with confidence: Once you’re approved, you’ll have access to a portion of your equity in your current home. You’ll be able to submit a competitive offer with no home sale contingency at any time — regardless of how long it takes to find your dream home. Our near-instant Equity Unlock Calculator lets you estimate how much equity we can unlock from your current home.

3. Sell your current home with peace of mind: After you move into your new home, we will list your unoccupied home on the market to attract the strongest offer possible. You’ll receive the remainder of your equity after the home sells.

Benefits of Homelight Buy Before You Sell

• Flexible timelines: There is no need to sync up sale and purchase dates perfectly. This program gives you breathing space to plan your move without feeling hurried.
• Financial peace of mind: Say goodbye to the stress of potential double mortgages or dipping into savings to bridge the gap between homes.
• Enhanced buying power: In a seller’s market, a non-contingent offer can stand out, increasing your chances of landing your dream home.
• Up to 13% more home sale earnings: After you move, you can list your old home unoccupied and potentially staged, which can lead to a higher selling price, according to data from HomeLight’s 2023 Top Agents Insight Report.

For Georgia homeowners caught in the buy-sell conundrum, HomeLight’s Buy Before You Sell program offers a convenient and stress-reducing solution. Learn more program details at this link.

HomeLight also offers other services for homebuyers and sellers in Georgia, such as Agent Match, which helps you find the top-performing real estate agents in your market, and Simple Sale, which provides a convenient way to receive a no-obligation, all-cash offer to sell your home in as little as 10 days.

You might also try HomeLight’s Net Proceeds Calculator as you plan your home sale.

A creative financing solution for Georgia homeowners

As Georgia homeowners face the challenges of low inventory and high home prices, many are turning to bridge loans as a strategic solution to streamline the process of buying a new home while selling the old one.

Bridge loans enable homeowners to use the equity in their previous property, easing the financial burden and timing constraints associated with simultaneous buying and selling. This method offers homeowners the luxury of time, reducing the stress of having to sell quickly.

However, while bridge loans can be a highly convenient option during this transition, they come with costs and might not be suitable for every situation.

For a more tailored approach, consider HomeLight’s Buy Before You Sell program, designed to alleviate the uncertainties of your next home purchase. HomeLight can also connect you with a top-performing Georgia buyer’s agent with experience in bridge loans.

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