Unlock Home Equity to ‘Buy Before You Sell’ With a Bridge Loan in Nevada

Navigating the real estate market in Nevada can be a challenging journey, especially when you’re trying to sell your old home and buy a new one simultaneously. This balancing act of timing and funds becomes even more daunting in a market where inventory is low and prices are high.

For many homeowners, it might seem like the only viable option is to sell, move out, and temporarily relocate while searching for that perfect new house. Enter the bridge loan, a potential game-changer for your property transition.

In this post, we’ll explore how a bridge loan could be the key to unlocking your homebuying and selling goals in Nevada.

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 Nevada, HomeLight encourages you to reach out to your own advisor.

What is a bridge loan?

A bridge loan is your stepping stone in the real estate world, especially when you’re in the midst of selling your current home while eyeing a new one. Think of it as a financial bridge that connects the gap between the sale of your existing property and the purchase of your next home.

This type of short-term loan leverages the equity in your current home, providing you with the necessary funds to make a down payment and handle closing costs on your new property.

While bridge loans are generally more expensive compared to traditional mortgages, they offer a significant advantage: speed and convenience. They enable you to swiftly secure your new home in Nevada without the pressure of waiting for your old home to sell.

How does a bridge loan work in Nevada?

Imagine you’ve found the perfect new home but haven’t sold your current one yet. A bridge loan steps in here, acting as a financial lifeline in this transitional phase. Here’s a glimpse of how it typically works in such a scenario:

The equity edge: You tap into the equity of your existing Nevada home to fund the down payment and closing costs of your new property. This approach is especially beneficial in Nevada’s tight real estate market, where waiting to sell first could mean losing out on your ideal home.

The entity behind the loan: More often than not, the lender managing the mortgage for your new Nevada home will also extend the bridge loan. They typically require that your current home is on the market and offer the bridge loan for a duration of six months to a year.

The balancing of debt: Your lender will assess your debt-to-income ratio (DTI), taking into account the payments for both your existing mortgage and your new home, along with any interest-only payments for the bridge loan. However, if your existing home is already in the process of being sold, with the buyer’s loan approved, the lender might only consider the mortgage payment of your new home for the DTI calculation.

Lenders want assurance that even if your current Nevada home doesn’t sell immediately, you’re not stretched too thin financially.

What are the benefits of a bridge loan in Nevada?

A bridge loan can provide several advantages that make your Nevada home-buying journey smoother and more flexible:

Make non-contingent offers: Position yourself strongly in competitive markets by making offers without sale contingencies.
Single move convenience: Avoid the hassle and expense of multiple moves by transitioning directly to your new home.
Prepare your old home in peace: Enhance and stage your previous home for sale without the pressures of living there.
Potential for payment-free period: Some lenders may offer a period without payments, easing financial strain during the transition.
Act quickly on ideal properties: Secure your dream home fast without worrying about the status of your current home’s sale.

These benefits combine to make bridge loans a strategic solution for Nevada homeowners who need financial flexibility before the proceeds from their home sale become available.

What are the drawbacks of a bridge loan?

While bridge loans offer significant advantages, it’s important to be aware of their potential drawbacks:

Additional loan costs: Expect to encounter underwriting fees, origination fees, and other associated costs.
Increased financial pressure: Juggling payments for two mortgages plus a bridge loan, even if it’s interest-only, can be stressful.
Stricter qualification criteria: Securing a bridge loan often requires more stringent qualifications compared to traditional mortgages.
Potential for slower underwriting: The underwriting process for bridge loans can sometimes take longer than expected.
Equity requirements: Lenders assess the equity in your current home. If you owe over 80% of its value, you might not qualify.

Being mindful of these drawbacks is crucial when considering a bridge loan for your real estate needs.