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

How does a bridge loan work in Florida?

A common real estate scenario in which a Florida buyer needs to apply for a bridge loan is when they need to purchase their new property before their old home has sold. In this case, they will use the equity from their previous home to cover the down payment and closing costs for their new purchase.

In many cases, the lender providing your new mortgage will also handle your bridge loan. They typically require that your existing home be listed on the market and will offer this bridge loan for a maximum of six months to one full year.

Depending on your unique situation, the lender on the new home might need to calculate your debt-to-income ratio (DTI). The DTI equation would include the payments from your current mortgage on your old house, your new payment on the home you are purchasing, and the interest-only payment on the bridge loan (if applicable).

However, your lender might be able to only include your new mortgage payment if your previous home is under contract and the new buyer has final loan approval for their purchase. Lenders closely examine your financial information to ensure that you will be able to make the payments on both properties in the event that your home does not sell immediately.

What are the benefits of a bridge loan in Florida?

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

What are the drawbacks of a bridge loan?

While a bridge loan can increase your flexibility and alleviate some stress when selling your current home and purchasing a new one, there are some drawbacks, as there can be with any type of loan product.

When is a bridge loan in Florida a good solution?

A bridge loan isn’t a blanket solution for all real estate transactions, but for some sellers, it can ease the stress of transitioning between an old home and a new one. Some examples of when a bridge loan might be a solution include:

• You need the equity you’ve built in your current home to make a down payment on a new one. A bridge loan lets you tap into that value without waiting for your home to sell.
• You only want to move once. A bridge loan can cover the gap between closing on your old home and buying a new one, so you don’t end up between homes and need to rent or stay in a hotel in the interim.
• You’ve found a new home, but don’t want to risk losing it to another buyer. If the market is competitive, you’ll need to act quickly and decisively.
• You’ve made an offer, but the seller won’t accept a home sale contingency. The bridge loan can free you up to buy straight away.
• You find it hard to prep or stage your current home while you’re still living in it. You need the space cleared to get the best sale price, or you’re planning renovations that are much easier to handle after you’ve already moved out.

What’s required to get a bridge loan in Florida?

To qualify for a bridge loan in Florida, you typically need the following:

• Qualifying income: Your lender will evaluate your income streams to determine if you can afford to make the payments on your current mortgage, your new mortgage, and possibly an interest-only payment on your bridge loan.
• Sufficient equity: You should have at least 20% equity in your current house, although some lenders will require up to 50% equity.
• Good credit history: Depending on the lender or bridge loan program, you will need a favorable credit score, typically above 650. Your score will likely influence your interest rate and other qualifications, such as loan-to-value ratio, so the higher, the better. You may check with your current mortgage lender, especially if you have a positive payment history, to see if they offer bridge loans to current owners.
• Currently listed home: This is not always the case, but some lenders might require proof that your current home is on the market to make sure it will be sold by the end of the bridge loan term.

How much does a bridge loan cost in Florida?

A bridge loan in Florida will typically carry a higher interest rate than a standard mortgage, says HomeLight agent and Jacksonville real estate expert Jeff Riber, who has almost two decades of experience helping homebuyers. Assuming a borrower can secure a mortgage rate of six percent, says Riber, “mid-to-high seven percent” up to “nine percent” would be a reasonable range to expect in terms of a bridge loan interest rate.

Underwriting can also be intensive for this type of lending, adds Riber, so borrowers may expect financing to move more slowly than what they are used to with a mortgage loan.

“35 to 40 days would be a reasonable expectation for a bridge loan,” says Riber. “It costs you a little bit more time [to get] the loan underwritten. Maybe it’s slightly more expensive in terms of the interest rate, but it’s going to save you tons of life hassle and headache and emotion.”

Bridge loan cost example

Below is an example of how much a $235,000 bridge loan might cost, along with possible fees.

Let’s say you find a home you’d like to purchase, but you’re still waiting for your current Florida house to sell. The new home’s asking price is $385,000. You can only come up with $150,000, but you have at least another $235,000 worth of equity in your current property. You want to access that money to cover the shortfall before your new home is sold to another buyer.

*These closing costs typically range between 1.5% to 3% 

Who provides bridge loans in Florida?

Due to the underwriting demands for this type of loan, Riber notes that fewer institutions offer bridge loan products. Curious borrowers may inquire with a variety of lenders before applying. The most common sources include:

• Their mortgage lender
• Local banks
• Credit unions
• Hard-money lenders
• Non-qualified mortgage (non-QM) lenders

There are also modern real estate companies that can seamlessly handle finding you a bridge loan to help you fill the gap between buying and selling a home. We’ll share how this works later in this post.

Are there alternatives to bridge loans in Florida?

If you think a bridge loan won’t work for your situation, here are some alternatives to consider:

Home equity loan: A home equity loan lets a homeowner take their existing equity out of their home’s value in the form of a lump sum payment. Interest rates for a home equity loan can be more expensive than your current rate on your first mortgage, but it may be more bearable in the long run since you can keep the bulk of the mortgage at its current rate.

Suppose you have a $300,000 mortgage with a 3% interest rate on a home valued over $450,000. You could secure a $100,000 home equity loan at an interest rate of 6% to 7% while maintaining your original mortgage at 3%.

Home equity line of credit (HELOC): Another option for homeowners to use their existing equity in their current home is a HELOC. This allows you to pull money out of your property for a relatively low interest rate. Instead of receiving the money all at once, your lender will extend a line of credit for you to borrow against. You might, however, have to pay an early closure fee if you open this line of credit and close it very soon after.

Cash-out refinance: This type of loan lets borrowers pull cash out of their home while refinancing their previous mortgage at the same time. Interest rates are typically higher for these kinds of loans compared to regular refinances, but are lower than those for bridge loans. This is not a solution for everyone, though. 

For example, you cannot do two owner-occupied loans within one year of one another. This would mean that you might have to wait longer to finance your new purchase with an owner-occupied mortgage using the cash from your cash-out refinance.

80-10-10 (piggyback) loan: This option is called a piggyback loan because you would be taking a first mortgage and second mortgage out at the same time to fund your new purchase. This means you would only need 10% down payment. For buyers who can’t make a large down payment before selling their previous home, this could be a solution that helps them avoid the cost of mortgage insurance. You would, however, still be carrying the cost of three mortgage payments until you sell your current home and can pay off the second mortgage.

401(k) loan: Borrowing against a retirement account lets you access cash quickly without a credit check, often at a lower interest rate. However, your repayment period will be relatively short (up to 5 years), and your monthly payment will likely be high. 

This could affect your ability to qualify for your new mortgage, as your lender will need to include this monthly payment when calculating your debt-to-income ratio. If your 401(k) plan allows, you might be able to borrow up to $50,000 to put toward your new purchase.

Are there companies in Florida that can help me buy a house before I sell?

With today’s modern technology, there are real estate solution companies like HomeLight that incorporate bridge loans into convenient programs that streamline the process of buying and selling a house at the same time in Florida. These “Buy Before You Sell” programs can provide a more complete “bridge” to help you successfully move to a new home, reducing stress and worries.

Together with your Florida agent, HomeLight can secure a new home with speed and certainty, while getting the strongest possible offer for your old home. Examples of other “buy before you sell” or home trade-in service companies include Knock Home Swap, Orchard, and Ribbon.

Watch the video below to see how our Buy Before You Sell program works:

How does HomeLight Buy Before You Sell work?

Here are the simple steps to using HomeLight’s Buy Before You Sell program in Florida:

1. Apply in minutes with no commitment: Find out if your property is a good fit for the program and get your equity unlock amount approved in 24 hours or less. No commitment is required.
2. Buy your dream home with confidence: Once you’re approved, you’ll have access to a portion of your equity in your current home. You’ll be able to submit a competitive offer with no home sale contingency at any time — regardless of how long it takes to find your dream home. Our near-instant Equity Unlock Calculator lets you estimate how much equity we can unlock from your current home.
3. Sell your current home with peace of mind: After you move into your new home, we will list your unoccupied Florida home on the market to attract the strongest offer possible. You’ll receive the remainder of your equity after the home sells.

Get started today with HomeLight Buy Before You Sell, and sell your current home with peace of mind.

HomeLight also offers other services for homebuyers and sellers nationwide, such as Agent Match to find the top-performing real estate agents in your market, and Simple Sale, a convenient way to receive a no-obligation, all-cash offer to sell your home in as little as 7 days.

A creative financing solution for Florida homeowners

Many Florida homebuyers rely on bridge loans to simplify the process of buying a new home while preparing to sell their current one. With a bridge loan, you can access your home’s equity upfront and use it toward your next purchase. This extra flexibility helps you avoid rushed decisions and makes the transition between homes much smoother.

Consider HomeLight’s Buy Before You Sell program to remove the uncertainty from your next home purchase.

Writer Madeline Sheen contributed to this story.

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