Bridge Loans in Austin: How to Unlock Home Equity to Buy Before You Sell
Explore the ins and outs of bridge loans in Austin: benefits, drawbacks, costs, providers, and modern alternatives. Learn how you can ‘Buy Before You Sell.’
Managing the sale of your Austin home while trying to purchase a new one can be difficult. With rising prices in a market where homes are in high demand, timing your sale and purchase can be particularly challenging.
Homeowners often feel their only option is to sell their current home, move into temporary accommodation, and search for their new house.
But what if there was a better way to transition from your old home to your new one?
Enter the bridge loan.
This short-term financing solution can provide the funds you need to secure your new Austin home before selling your old one.
Yes, You Can Buy Before You Sell. Why Move Twice?
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
DISCLAIMER: As a friendly reminder, this post is intended for educational purposes, not financial advice. If you need assistance navigating the use of a bridge loan in Austin, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan, in simple words?
A bridge loan is a temporary solution designed to “bridge the gap” between selling your current home and buying a new one. Imagine you’ve found your dream home, but your funds are tied up in your existing home’s equity.
A bridge loan lets you leverage the equity in your current home to provide the necessary cash for a down payment and to handle closing costs for your new house.
Although they tend to be pricier than traditional mortgages, bridge loans offer flexibility when trying to secure your new home purchase without waiting to sell your old one.
How does a bridge loan work in Austin?
A bridge loan often comes into play when you’re eager to snap up a new property before your old home has sold. It’s a common scenario: you’ve found the perfect new home but need to access the equity from your current home to cover the down payment and closing costs for this new venture.
Typically, the lender handling your mortgage for the new Austin property will also manage your bridge loan. They’ll require that your existing home is actively listed for sale. These bridge loans are generally available for a period ranging from six months to a year.
The lender will calculate your debt-to-income ratio (DTI). This calculation will include the ongoing mortgage payments on your current Austin home, the payments for the new property, and any interest-only payments on the bridge loan, if applicable.
If your old home is already under contract with a buyer who has secured their loan approval, your lender might only consider the mortgage payments for your new home. This is done to ensure that you can comfortably manage payments on both properties, providing a safety net in the unlikely event that your current home doesn’t sell quickly.
What are the benefits of a bridge loan in Austin?
Bridge loans offer several advantages for Austin homebuyers, making them an appealing option in the competitive real estate market:
