Bridge Loans, Contingencies & HELOCs
How does it work to Buy before Selling?
Most homeowners who purchased prior to 2020 have significant equity in their current home, but accessing that equity can sometimes feel risky and/or overwhelming. As a result, many would be Buyers have cozied up to their sub 3% mortgages and stay exactly where they are at.
Which is awesome, but life has a way of changing our plans! Today, we want to talk about what you can do when that happens – or even better, how to get ahead and create some options for your family.
Option 1: A HELOC (Home Equity Line of Credit)
For many homeowners, a HELOC can be one of the most flexible — and often least expensive — ways to access equity before purchasing a new home.
A HELOC works as a revolving line of credit secured by your current home. Rather than borrowing a lump sum upfront, you only borrow what you actually need, and you typically only pay interest on the amount you use.
Homeowners commonly use HELOC funds for a down payment on their next home, or other moving expenses such as repairs or updates that are needed before listing their current home (the Windermere Ready loan can be used for these types of projects too).
Compared to bridge loans, HELOCs often come with lower interest rates and lower upfront costs. The tradeoff is that they usually require advance planning. Many lenders are hesitant to open a new HELOC once a property is actively listed for sale, so homeowners often benefit from setting one up well before beginning the home search process.
Reminder, you must go to a bank or credit union to get a HELOC. Mortgage brokers can’t provide them. Ask me if you need a referral!
Option 2: A Bridge Loan
A bridge loan is designed specifically to help homeowners buy a new home before their current one sells. This short-term financing option allows you to borrow against the equity in your existing home and use those funds toward the purchase of your next property. Bridge loans are often used when timing is tight and a buyer wants to move quickly on a new opportunity.
Bridge Loans can be especially helpful if:
- You’ve already found your next home
- You need funds for a down payment
- You want to make a stronger offer without a home sale contingency
- You expect your current home to sell quickly
Bridge loans are typically more expensive than HELOCs, with higher interest rates and additional loan fees, but they can provide valuable flexibility in fast-moving markets.
For homeowners trying to compete in multiple-offer situations, removing the need for a home sale contingency can make an offer significantly more attractive to sellers. Be sure to ask me or your lender about recasting your new mortgage after you sell your current home.
Option 3: A Home Sale Contingency
Another option is submitting an offer that is contingent upon the successful sale of your current home. This means the purchase can only move forward once your existing property closes.
While this can reduce financial risk for buyers, it is often the most challenging strategy in competitive market conditions — especially during Spring/early Summer when the hottest new listings may receive multiple offers.
In slower markets or with highly motivated sellers, a home sale contingency can still be a viable path (just expect to pay a premium for the privilege). There are some strategies that can also make your contingent offer more appealing, like getting your departure residence pre-inspected and establishing a competitive list price.
Generally, contingent offers are most successful in off peak months, or in areas with lots of sitting inventory.
Planning Ahead Creates More Options, Greater Certainty
Every homeowner’s situation is different, and the right strategy depends on factors like available equity, urgency/timeline, and current market conditions for the markets you’re navigating.
Buying and Selling at the same time is challenging, but not impossible! If you want to do some planning so you’re ready for your next move, let’s connect and talk about what option makes the most sense for you.
