Bridge Loans in Charleston: How to Unlock Home Equity to Buy Before You Sell

Selling your Charleston home while shopping for a new one can feel like a juggling act. Timing the two transactions perfectly isn’t easy, especially when inventory is low and prices are high.

You might feel like your only option is to sell first, move out, and find a temporary place to live while you search for your next home. But there’s another way.

A bridge loan can help you buy a new home before selling your current one. This short-term financing option could be the piece you need to make your move smoother and less stressful.

In this post, we’ll break down how bridge loans work in Charleston and share other creative solutions to help you buy before you sell.

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.

Buy Before You Sell

What is a bridge loan, in simple words?

When you’re buying a new home but still need to sell your old one, a bridge loan can help fill the financial gap. A bridge loan (sometimes called a swing loan or bridging loan) is a short-term loan that uses the equity in your current home to help you move forward with your next purchase.

With a bridge loan, you can tap into your home’s value to cover a down payment, closing costs, or other expenses tied to your new home. These loans usually come with higher interest rates than traditional mortgages, but they offer speed and convenience when timing is tight.

How does a bridge loan work in Charleston?

A common situation where you might use a bridge loan in Charleston is when you need to buy a new home before your current one sells. In this case, you would use the equity from your existing home to help cover your down payment and closing costs on the new property.

Often, the lender providing your new mortgage can also handle your bridge loan. They typically require that your current home be listed for sale and offer the bridge loan for a short term, usually six months to one year.

When reviewing your application, the lender may need to calculate your debt-to-income ratio. This calculation includes your current mortgage payment, your new mortgage payment, and an interest-only payment on the bridge loan.

However, if your old home is under contract and the buyer has final loan approval, your lender might only consider your new mortgage payment. Either way, the lender wants to be confident you can afford the payments on both homes if your old one doesn’t sell right away.

What are the benefits of a bridge loan in Charleston?

There are benefits to borrowing a bridge loan that can position you as a more flexible homebuyer in Charleston.

• You can make a non-contingent offer: A non-contingent offer helps you buy without waiting to sell your current home.
• You only have to move once: You can Move straight into your new home without the stress of finding temporary housing.
• You can prepare your old home for sale: Once you move out, it’s easier to prepare your old home for sale by cleaning, repairing, and staging it.
• Some lenders don’t require payments during the loan period. For example, you might not have to make bridge loan payments until your home sells.
• You can move on the right property quickly: You can act fast on a new home without worrying about the status of your old one.

What are the drawbacks of a bridge loan?

While a bridge loan can increase your flexibility and reduce stress when buying and selling, there are some drawbacks to consider.

• Additional loan costs: Expect fees like underwriting, origination, and administrative costs added to the loan balance.
• Added financial stress: You could face paying two mortgages and a bridge loan at the same time, even if the latter is interest-only.
• Qualifying may be more difficult: Lenders often have stricter requirements compared to a traditional mortgage.
• Underwriting can be slower: The approval process might take longer than you expect, especially if documents need extra review.

In addition to reviewing your monthly income, lenders will also look at how much equity you have in your current home. If you owe more than 80% of your home’s value, you might not qualify for a bridge loan.

When is a bridge loan a good solution?

A bridge loan isn’t a blanket solution for every real estate situation, but for some Charleston sellers, it can ease the stress of moving from an old home to a new one.

Some examples of when a bridge loan might be a fitting solution include:

• You need the equity from your current home to cover the down payment on a new purchase.
• You can’t afford a double move and interim housing, and lining up the sale and purchase timelines is essential.
• Your dream home just came on the market, and you want to act quickly without waiting for your home to sell.
• Your home sale contingency is blocking your offer from being accepted, and you need immediate purchasing power.
• You cannot fully move out, clean, or list your old home in its best light without leaving first, and you want a staged home to attract better offers.