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

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

If you are selling your home in Florida but also looking to purchase a new one, the timing of both transactions can feel impossible to plan perfectly. If you are relying on the equity in your current home to make a down payment on the new one, it may seem as if your only option is to sell, move out, and find a third location to live while you shop for the new house. But before you resign yourself to months of mayhem, you may consider a bridge loan to streamline the process and reduce stress.

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What is a bridge loan, in simple words?

In real estate, a bridge loan is intended to be a convenient and fast way to buy your new home without waiting for your old home to sell. This short-term financing (also called a swing or bridging loan) helps homeowners during the transition between properties.

A bridge loan is typically more expensive than a traditional mortgage. This is because there is more risk involved for the lender. The bridge lender will loan the buyer the equity they have built in their existing house in order for them to move forward with the purchase of a new home.

How does a bridge loan work in Florida?

A common scenario in real estate where a Florida buyer will need to apply for a bridge loan occurs 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.

Homeowners in Florida have seen spikes in home value by as much as 50% over the last three years, and though the market has cooled somewhat in 2023, the overall spike in home values may signal somewhat lower risk for lenders, helping more sellers to secure a bridge loan.

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 do this 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.

  • 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
  • Some lenders don’t require payments during the loan period
  • You can move on the right property quickly without worrying about the status of your current home’s sale

What are the drawbacks of a bridge loan?

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

  • Additional loan costs (underwriting fee, origination fees, etc.)
  • Added financial stress of paying up to two mortgages and a bridge loan (even if interest-only) all at once
  • Qualifying may be more difficult than a traditional mortgage loan
  • Underwriting can be a slower process than what you are prepared for

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 in order to make a down payment on a new one.
  • You only want to move once. A bridge loan can float the time 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 straightaway.
  • You’re unable to prepare or stage your current home for sale while still living in it. This could be because you need a blank slate to earn the best sale price, or maybe you need a significant renovation that would be easier to tackle once you’ve 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.
  • Your current home to be listed for sale: 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 16 years 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. “And maybe it costs you a little bit more time and getting the loan underwritten, maybe it’s slightly more expensive in terms of the interest rate, but it’s going save you tons of life hassle and headache and emotion.”

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 submitting an application. 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?

While a bridge loan might not work for every homeowner’s unique situation, there are alternatives to consider:

  • Home equity loan: This kind of 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 instead of completing a cash-out refinance for, say, $400,000 at 5% (paying off the first mortgage and borrowing cash), you can just borrow the $100,000 you need at a 6% interest rate and leave your first mortgage of $300,000 at its lower rate of 3%.
  • Home equity line of credit (HELOC): Another option for homeowners to use their existing equity in their current home, HELOCs allow a borrower to pull money out of their 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 that you would only need 10% down. For buyers who can’t make as large of a 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.
  • A 401k loan: Borrowing against your retirement account comes with some benefits and drawbacks — 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 401k 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 complete your move to a new home —  significantly reducing stress and worries.

Together with your agent, HomeLight can help you move into your new home with speed and certainty — while helping you get 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.

How does HomeLight Buy Before You Sell work?

Here is how HomeLight’s Buy Before You Sell program works for home sellers 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.

*Check with your agent about availability and pricing in your market.

Benefits of the Buy Before You Sell program

  • Unlock a portion of equity from your current home
  • Make a strong offer on your next home, and save money with no home sale contingency
  • Avoid renting and moving twice
  • Maximize the sale price of your current home

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 10 days.

A creative financing solution for Florida homeowners

As Florida homebuyers navigate an increasingly competitive market and consistently rising home prices, some are turning to bridge loans to simplify the process of buying a new home and selling their old one. These short-term loans let homeowners borrow against the equity they have built in their previous home before selling. This way, homeowners can put that equity toward a new purchase, giving them more time to sell and taking away much of the hassle of getting the timing right.

Consider HomeLight’s Buy Before You Sell program to help take the uncertainty out of your next home purchase.

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