Harnessing Home Equity in Oregon: ‘Buy Before You Sell’ With a Bridge Loan
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Richard Haddad Managing EditorClose
Richard Haddad Managing EditorRichard Haddad is the managing editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
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 offers a practical way to leverage the equity in your current home, providing financial flexibility. This guide will explore how bridge loans work in Oregon, weighing their benefits and drawbacks, and offering insight into modern solutions for the buy-before-you-sell conundrum.
Yes, You Can Buy Before You Sell. Why Move Twice?
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
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 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 elegantly 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 also 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.
- Quick access to funds: Access 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: More time and space to stage and sell your previous home after moving out.
- Optional 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 position a bridge loan as a strategic choice for Oregon homeowners who need a financial bridge 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:
- Additional loan costs: Expect underwriting fees, origination fees, and other charges associated with a bridge loan.
- Increased financial burden: Juggling payments for two mortgages plus a bridge loan can be financially challenging.
- Tougher qualification criteria: Qualifying for a bridge loan can be more difficult than for a traditional mortgage.
- Slower underwriting process: The approval process for a bridge loan might take longer than expected.
- Equity requirements: Your eligibility depends on the equity in your current home; owing more than 80% of its value could be a disqualifier.
- 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.
When is a bridge loan a good solution?
A bridge loan can be a valuable tool in specific real estate scenarios, providing the necessary flexibility and financial leverage during home transitions. Here are some situations where a bridge loan might be the ideal solution:
- You need equity from your current home for a down payment on a new property.
- Avoiding the cost and hassle of double moves and temporary housing is a major planning factor for you.
- You’ve found your dream home and need to act fast without waiting for your current home to sell.
- Your offers with home sale contingencies are not being accepted in a competitive market.
- Selling an empty or staged home is your goal, as it can often lead to quicker sales and potentially higher offers.
What’s required to get a bridge loan in Oregon?
To qualify for a bridge loan in Oregon, certain criteria must be met:
- Qualifying income: Lenders will assess your income to ensure you can manage payments on your existing mortgage, the new mortgage, and the bridge loan.
- Sufficient equity: You’ll need a minimum of 20% equity in your current home, though some lenders may ask for up to 50%.
- Good credit history: A favorable credit score, often above 650, is a key qualifier. This impacts your interest rate and other borrowing terms.
- Current home listed for sale: Many lenders require that your current home be on the market, confirming its likely sale within the bridge loan’s term.
- Debt-to-income ratio: Lenders will evaluate your debt-to-income ratio to ensure you can comfortably handle the additional loan.
- Proof of homeownership: Documentation proving you own your current property is necessary.
- Detailed financial documentation: Be prepared to provide bank statements, tax returns, and other financial records for thorough evaluation.
How much does a bridge loan cost in Oregon?
The cost of a bridge loan in Oregon typically comes with a higher interest rate than a standard mortgage. Rates for bridge loans can be 1-3 percentage points above traditional mortgage rates. Additionally, bridge loans often incur extra transaction fees.
This higher cost reflects the increased risk for lenders, given the uncertainty of when your current home will sell. As a borrower, it’s vital to consider the possibility of having to make payments on both your mortgage and bridge loan if your home doesn’t sell quickly.
Your specific interest rate will depend on factors like your creditworthiness and the lender you choose.
How to reduce bridge loan costs
Applying for a bridge loan with the same lender as your new mortgage can potentially reduce costs. You might not need to pay additional underwriting or mortgage fees since the bridge loan and mortgage will be processed together.
It’s advisable to compare different lenders and bridge loan options. Remember, a bridge loan is a short-term solution. Evaluate your options not just based on cost, but also on convenience and suitability for your situation.
Budget for closing costs
In addition to interest and fees, you’ll need to budget for closing costs and other legal and administrative expenses. Closing costs and fees typically range from 1.5% to 3% of the loan amount and can include:
- Appraisal fee
- Administration fee
- Escrow fee
- Title policy costs
- Notary fee
- Loan origination fee
Bridge loan cost example
Below is an example of how much a $250,000 bridge loan might cost, along with possible fees.
You find a home you’d like to purchase, but you’re still waiting for your current Oregon house to sell. The new home’s asking price is $500,000. You can only come up with $200,000, but you have at least another $250,000 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.
| Net loan amount | $250,000 | $250,000 |
| Interest (varies) | 10% (example for 6 months) | $12,500 |
| Origination fee | 1.5% | $3,750 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $500 | $500 |
| Closing cost* | 2% | $5,000 |
| Total repayable amount | $272,750 |
*These closing costs typically range between 1.5%-3%
What's Your Current Home Worth?
As you make plans to buy a new home, get a value estimate on your current house from HomeLight for free. Our tool analyzes records of recently sold homes near you, your home’s last sale price, and other market trends to provide a preliminary range of value in under two minutes.
Who provides bridge loans in Oregon?
In Oregon, the availability of bridge loans can vary due to the specific underwriting requirements and risks associated with this type of loan. If you’re considering a bridge loan, it’s worthwhile to explore different lending options. Common sources for bridge loans in Oregon include:
- Your mortgage lender: Start with the institution handling your mortgage; they may offer bridge loans as part of their services.
- Local banks: Some local banks provide bridge loans, often with terms that are tailored to the local market.
- Credit unions: Member-oriented credit unions in Oregon sometimes offer bridge loans with competitive terms.
- Hard-money lenders: These are private investors or companies that offer bridge loans, typically at higher interest rates.
- Non-qualified mortgage (non-QM) lenders: These lenders specialize in loans that don’t meet traditional underwriting standards, including bridge loans.
Additionally, modern real estate companies in Oregon may offer services that include facilitating bridge loans, simplifying the process of bridging the gap between buying and selling homes. More details on this option will be discussed later in this post.
Are there alternatives to bridge loans in Oregon?
While a bridge loan might not work for every Oregon homeowner’s unique situation, there are alternatives to consider:
- Home equity loan: This kind of loan (sometimes called a HEL) allows you to borrow money using the equity in your home as collateral. 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 (paying off the first mortgage and borrowing cash), you can just borrow the money you need at the higher interest rate and leave your first mortgage of at its lower rate.
- Home equity line of credit (HELOC): Another option to use your existing equity 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. Unlike a home equity loan, HELOCs typically have adjustable interest rates.
- Cash-out refinance: This type of loan lets you pull cash out of your home while refinancing your 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 modern ways to buy a house before I sell?
With today’s 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 Oregon. These “Buy Before You Sell” programs can provide a more complete “bridge” to help you successfully complete your move to a new home, thereby reducing stress and worry.
Together with your Oregon 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. Check with your agent to see if HomeLight Buy Before You Sell is available in your area.
Examples of other “Buy Before You Sell,” or home trade-in service companies include Knock, Orchard, Flyhomes, and Homeward.
How does HomeLight Buy Before You Sell work?
Here is how HomeLight’s Buy Before You Sell program works for home sellers in Oregon:
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 cost or 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 home on the market to attract the strongest offer possible. You’ll receive the remainder of your equity after the home sells.
Benefits of Homelight Buy Before You Sell
- Flexibility in timelines: No need to sync up sale and purchase dates perfectly. This program gives you breathing space to plan your move without feeling hurried.
- Financial peace of mind: Say goodbye to the stress of potential double mortgages or dipping into savings to bridge the gap between homes.
- Enhanced buying power: In a seller’s market, a non-contingent offer can stand out, increasing your chances of landing your dream home.
- Sell for up to 10% more: After you move, you can list your old home unoccupied and potentially staged, which can lead to a higher selling price, according to HomeLight transaction data.
For Oregon homeowners caught in the buy-sell conundrum, HomeLight’s Buy Before You Sell program offers a convenient and stress-reducing solution. Learn more program details at this link.
HomeLight also offers other services for homebuyers and sellers in Oregon, 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.
You might also try HomeLight’s Net Proceeds Calculator as you plan your home sale.
A creative financing solution for Oregon homeowners
As Oregon homeowners face the complexities of a low-inventory housing market and rising property values, many are discovering the advantages of bridge loans to streamline the transition between selling their current home and purchasing a new one.
Bridge loans offer a practical solution, allowing you to leverage the equity in your previous home for your next purchase. This approach provides more flexibility in timing your sale and reduces the stress of aligning these two significant transactions.
However, it’s important to recognize that bridge loans, while convenient, may not be the ideal solution for everyone. They come with their own set of costs and considerations.
If you’re looking for additional convenience and peace of mind, consider HomeLight’s Buy Before You Sell program to help take the uncertainty out of your next home purchase. HomeLight can also connect you with a top-performing Oregon buyer’s agent with experience in bridge loans.
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