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

Navigating the real estate market in Oregon can often feel like a high-stakes balancing act, especially when you’re caught in the dilemma of selling your current home while eyeing your next dream house. For many homeowners, timing the sale and purchase perfectly is a challenging puzzle, made even more complex in a market where inventory is low and prices are high.

You might think your only option is to sell, vacate, and temporarily relocate while you search for a new home. But there’s a more streamlined solution that might just fit your needs: a bridge loan.

A bridge loan is a practical way to leverage the equity in your current home, providing financial flexibility. This guide explores how bridge loans work in Oregon, weighs their benefits and drawbacks, and offers insight into modern solutions for the buy-before-you-sell conundrum.

DISCLAIMER: This post is intended for educational purposes, not financial advice. If you need assistance navigating the use of a bridge loan in Oregon, HomeLight encourages you to reach out to your own advisor.

What is a bridge loan, in simple words?

A bridge loan is essentially a financial tool designed to make your journey from one home to another smoother and faster. It’s a short-term loan that taps into the equity of your current home, providing you with the necessary funds to make a down payment or cover closing costs on your new property in Oregon, even before your old home is sold.

Picture a bridge loan as your personal financial bridge. It connects the sale of your existing home with the purchase of your new one.

Typically, a bridge loan has a lifespan of six months to a year, though some lenders may offer more flexible terms based on your financial situation. Due to their temporary nature and the risk involved, bridge loans generally carry slightly higher interest rates compared to traditional mortgages.

How does a bridge loan work in Oregon?

Imagine you’re eyeing a charming house in Oregon, but the sale of your current home is still pending. In such a scenario, a bridge loan acts as a temporary lifeline, ensuring you don’t miss out on your ideal property due to timing issues.

Many lenders in Oregon, especially those offering your new mortgage, can provide a bridge loan. They usually require that your current home is actively listed for sale.

An important factor in this process is your debt-to-income ratio (DTI). Lenders will calculate this by considering your existing mortgage, the mortgage on your new Oregon home, and the interest-only payment on the bridge loan. However, if your current home is under contract and the buyer’s financing is secure, some lenders might only factor in the mortgage of your new home.

What are the benefits of a bridge loan in Oregon?

In Oregon, bridge loans come with several advantages that can enhance your flexibility and ease during the home-buying process.

Access funds quickly: Obtain equity from your current home quickly for a down payment on a new property.
Make a non-contingent offer: Strengthen your bid on a new home without waiting for your old one to sell.
Single moving process: Avoid the hassle and cost of moving twice or renting temporarily.
Prepare your old home for sale: After moving out, you will have more time and space to stage and sell your previous home.
Take advantage of the payment deferral: Some lenders offer a period without payments, easing financial pressure during the transition.
Act fast on ideal properties: Secure your dream home in Oregon’s competitive market without sale contingency delays.

These benefits make a bridge loan a strategic choice for Oregon homeowners who need a financial cushion before they can sell their current property.

What are the drawbacks of a bridge loan?

While bridge loans can be incredibly helpful, it’s important to consider their potential drawbacks before deciding if one is right for you:

Incur additional loan costs: Expect underwriting fees, origination fees, and other charges associated with a bridge loan.
Deal with an increased financial burden: Juggling payments for two mortgages plus a bridge loan can be financially challenging.
Face tougher qualification criteria: Qualifying for a bridge loan can be more difficult than for a traditional mortgage.
Prepare for a slower underwriting process: The approval process for a bridge loan might take longer than expected.
Satisfy equity requirements: Your eligibility depends on the equity in your current home. Owing more than 80% of its value could be a disqualifier.
Brace for higher interest rates: Bridge loans typically have higher interest rates compared to traditional long-term mortgages.

It’s crucial to weigh these factors against your financial situation and goals before pursuing a bridge loan.