Bridge Loans in South Carolina: How to Unlock Home Equity to Buy Before You Sell
Explore the ins and outs of bridge loans in South Carolina: benefits, drawbacks, costs, providers, and modern alternatives. Learn how you can ‘Buy Before You Sell.’
If you’re ready to buy a new home in South Carolina but still need to sell your current one, it can be challenging to figure out the correct timing. Coordinating the sale of your current home and purchasing a new one is even more difficult when competition is fierce and prices are high. You might think your only option is to sell, find temporary housing, and hope your next home becomes available soon.
A bridge loan could offer a better solution. With short-term financing, a bridge loan helps you secure your new home while giving you the time to sell your existing one—making it easier to move forward without the juggling act.
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 South Carolina, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan, in simple words?
A bridge loan, sometimes called a swing loan or gap financing, is a short-term loan designed to help you buy a new home while you’re still working on selling your current one. This type of loan leverages the equity in your existing property, giving you the cash you need for a down payment and closing costs on your next home.
While bridge loans tend to have higher rates than traditional mortgages, they offer a convenient and quick solution for homeowners who need flexibility to make a smooth transition.
How does a bridge loan work in South Carolina?
A typical scenario where a South Carolina buyer might need a bridge loan is when they find the right new home before their current one has sold. In this case, you can use the equity from your existing home to cover the down payment and closing costs on your new purchase.
Usually, the lender handling your new mortgage can also provide a bridge loan, often with terms lasting six months to one year. As part of the approval process, they may calculate your debt-to-income ratio (DTI), including payments on both your current and new mortgages and any interest on the bridge loan, if applicable.
In some cases, if your existing home is already under contract and the buyer’s loan is approved, the lender might only count the new mortgage in your DTI.
What are the benefits of a bridge loan in South Carolina?
Using a bridge loan has several benefits, including allowing you to buy your new home while smoothly managing the transition.
- You can make a non-contingent offer on your new home
- You only have to move once
- You can prepare your old home for sale after moving out
- You can complete staging without the pressure of living in the home
- You can act quickly on a new home without waiting to sell your current one
What are the drawbacks of a bridge loan?
While a bridge loan can provide flexibility, it also comes with a few potential drawbacks that are important to consider.
- Additional costs, including underwriting and origination fees
- Higher interest rates than a traditional mortgage
- The added financial strain of paying up to two mortgages and a bridge loan
- May be harder to qualify for than a traditional mortgage
- Underwriting can sometimes take longer than expected
Lenders will review both your income and the equity in your current home to determine how much you can borrow. Qualifying may be challenging if you owe more than 80% of your home’s value.
When is a bridge loan a good solution?
A bridge loan isn’t the right fit for every situation, but in some cases, it can make the buy-sell transition smoother.
Some scenarios where a bridge loan might be a helpful solution include:
- You need the equity from your current home for a down payment on your new home.
- You want to avoid a double move and interim housing by bridging the sale and purchase timelines.
- Your dream home just became available, and you’re eager to act quickly without delays.
- Your offer’s home sale contingency has been a deal-breaker, and you need immediate purchasing power.
- You’re unable to prepare or stage your current home for sale while still living in it, and selling a vacant or staged home may be more appealing and convenient.
