Harnessing Home Equity in Oregon: ‘Buy Before You Sell’ With a Bridge Loan

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

To qualify for a bridge loan in Oregon, certain criteria must be met:

• Qualifying income: Lenders will assess your income to ensure you can manage payments on your existing mortgage, the new mortgage, and the bridge loan.
• Sufficient equity: You’ll need a minimum of 20% equity in your current home, though some lenders may ask for up to 50%.
• Good credit history: A favorable credit score, often above 650, is a key qualifier. This impacts your interest rate and other borrowing terms.
• Current home listed for sale: Many lenders require that your current home be on the market, confirming its likely sale within the bridge loan’s term.
• Debt-to-income ratio: Lenders will evaluate your debt-to-income ratio to ensure you can comfortably handle the additional loan.
• Proof of homeownership: Documentation proving you own your current property is necessary.
• Detailed financial documentation: Be prepared to provide bank statements, tax returns, and other financial records for thorough evaluation.

How much does a bridge loan cost in Oregon?

The cost of a bridge loan in Oregon typically comes with a higher interest rate than a standard mortgage. Rates for bridge loans can be 1 to 3 percentage points above traditional mortgage rates. Additionally, bridge loans often incur extra transaction fees.

This higher cost reflects the increased risk for lenders, given the uncertainty of when your current home will sell. As a borrower, it’s vital to consider the possibility of having to make payments on both your mortgage and bridge loan if your home doesn’t sell quickly.

Your specific interest rate will depend on factors like your creditworthiness and the lender you choose.

How to reduce bridge loan costs

Applying for a bridge loan with the same lender as your new mortgage can potentially reduce costs. You might not need to pay additional underwriting or mortgage fees since the bridge loan and mortgage will be processed together.

It’s advisable to compare different lenders and bridge loan options. Remember, a bridge loan is a short-term solution. Evaluate your options not just based on cost but also on convenience and suitability for your situation.

Bridge loan cost example

Below is an example of how much a $250,000 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 Oregon house to sell. The new home’s asking price is $500,000. You can only come up with $200,000, but you have at least another $250,000 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% to 3% 

Who provides bridge loans in Oregon?

In Oregon, the availability of bridge loans can vary due to the specific underwriting requirements and risks associated with this type of loan. If you’re considering a bridge loan, it’s worthwhile to explore different lending options. Common sources for bridge loans in Oregon include:

• Your mortgage lender: Start with the lending institution handling your mortgage; they may offer bridge loans as part of their services.
• Local banks: Some local banks provide bridge loans, often with terms that are tailored to the local market.
• Credit unions: Member-oriented credit unions in Oregon sometimes offer bridge loans with competitive terms.
• Hard-money lenders: These are private investors or companies that offer bridge loans, typically at higher interest rates.
• Non-qualified mortgage (non-QM) lenders: These lenders specialize in loans that don’t meet traditional underwriting standards, including bridge loans.

Additionally, modern real estate companies in Oregon may offer services that include facilitating bridge loans and simplifying the process of bridging the gap between buying and selling homes. This option will be discussed in more detail later in this post.

Are there alternatives to bridge loans in Oregon?

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

• Home equity loan: This kind of loan (sometimes 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 the 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: While borrowing against your retirement account comes with some benefits, such as avoiding early withdrawal penalties and taxes, it comes with 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 Oregon. 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 Oregon 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 Oregon:

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.

For Oregon 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 Oregon, such as Agent Match, allowing you to find the top-performing real estate agents in your market, and Simple Sale, 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 Oregon homeowners

As Oregon homeowners face the complexities of a low-inventory housing market and rising property values, many are discovering the advantages of bridge loans to streamline the transition between selling their current home and purchasing a new one.

Bridge loans offer a practical solution, allowing you to leverage the equity in your previous home for your next purchase. This approach provides more flexibility in timing your sale and reduces the stress of aligning these two significant transactions.

However, it’s important to recognize that bridge loans, while convenient, may not be the ideal solution for everyone. They come with their own set of costs and considerations.

If you’re looking for additional convenience and peace of mind, consider HomeLight’s Buy Before You Sell program to remove the uncertainty from your next home purchase. HomeLight can also connect you with a top-performing Oregon buyer’s agent with experience in bridge loans.

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