Bridge Loans in Rhode Island: How to Unlock Home Equity to Buy Before You Sell
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Cheyenne Wiseman Associate EditorClose
Cheyenne Wiseman Associate EditorCheyenne Wiseman is an Associate Editor at HomeLight.com. Previously, she worked as a writer for Static Media (Mashed.com and Chowhound.com) and as an editor for CBR.com. Cheyenne holds a bachelor’s degree in English from UC Davis, where she also founded and led a literary magazine called Open Ceilings. She has four years of experience writing and editing on topics including real estate, financial advising, and pharmaceuticals.
Selling your current home while buying a new one can feel like a juggling act. Getting the timing right, especially in a competitive market like Rhode Island, can be stressful.
When homes are selling quickly and inventory is limited, it may seem like your only choice is to sell your current home first and move into a temporary place while you look for your next one. But moving twice isn’t ideal for most people. Fortunately, there’s another option.
A bridge loan can help you buy your next home before selling your current one. This short-term financing option gives you more flexibility and control over your timeline. In this guide, we’ll walk you through everything you need to know about bridge loans in Rhode Island.
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.
What is a bridge loan, in simple words?
A bridge loan is a short-term loan that helps you buy a new home before your current home sells. It lets you borrow against the equity you’ve built in your existing home, giving you access to funds that can be used for a down payment, closing costs, or other expenses related to your next purchase.
Because bridge loans are designed to provide quick access to cash, they typically have higher costs than a traditional mortgage. Still, many Rhode Island buyers find the added flexibility worthwhile because it can help them avoid a rushed home sale or the need for temporary housing.
Bridge loans are also sometimes called:
- bridge financing
- bridging loan
- interim financing
- gap financing
- swing loans
How does a bridge loan work in Rhode Island?
A common situation where a bridge loan can help is when you find a new home you want to buy before your current home has sold. In this case, you can use the equity you’ve built in your existing home to help cover the down payment and closing costs on your next purchase.
In many cases, the lender providing your new mortgage may also offer a bridge loan. They often require your current home to be actively listed for sale and typically offer bridge loans with terms ranging from six months to one year.
As part of the approval process, the lender will review your debt-to-income ratio. Depending on your situation, they may factor in your current mortgage payment, your new mortgage payment, and any payments associated with the bridge loan.
If your current home is already under contract and the buyer has secured final loan approval, the lender may only count your new mortgage payment. This helps reduce the risk of taking on more debt than you can comfortably manage if your current home takes longer than expected to close.
What are the benefits of a bridge loan in Rhode Island?
In Rhode Island, a bridge loan can offer several advantages when you’re buying and selling at the same time:
- Make a non-contingent offer: Sellers frequently prefer buyers without home sale contingencies.
- Only move once: Skip the hassle and extra costs of temporary housing or storage.
- You can prep your old home: Move out first, then focus on preparing your home with staging and repairs.
- No payments during the loan period: You may not owe anything until your old home sells.
- You can act fast on the right home: Make an offer without worrying about selling first.
What are the drawbacks of a bridge loan?
While bridge loans can provide flexibility, they aren’t the right fit for every buyer:
- Higher borrowing costs: You may pay origination fees, closing costs, and a higher interest rate than you would with a traditional mortgage.
- More financial obligations: In some cases, you’ll be responsible for multiple loan payments at the same time.
- Stricter qualification requirements: Lenders often require strong credit, sufficient equity, and solid income.
- Additional underwriting: The approval process can be more complex than a standard mortgage.
When is a bridge loan a good solution?
A bridge loan may make sense if you’re trying to coordinate the sale of one home with the purchase of another.
Some common situations include:
- You need the equity in your current home to make your new home’s down payment.
- You can’t afford the costs of a double move or temporary housing between selling and buying.
- You’ve found a home you love and want to make an offer before someone else does.
- Your offer’s home sale contingency has been a deal-breaker for sellers.
- You’d like to move out before preparing your current home for showings and staging.
What’s required to get a bridge loan in Rhode Island?
To qualify for a bridge loan in Rhode Island, you typically need the following:
- Qualifying income: Lenders will review whether you can afford your existing mortgage, your new mortgage, and any bridge loan obligations.
- Sufficient equity: Many lenders require at least 20% equity in your current home, though some may require more.
- Good credit: A credit score of 650 or higher is commonly preferred.
- An active home listing: Some lenders require your current property to be listed for sale before approving a bridge loan.
How much does a bridge loan cost in Rhode Island?
Below is an example of how much a $360,000 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 Rhode Island 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 $360,000 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 | $360,000 | $360,000 |
| Interest (varies) | 10% (example for 6 months) | $18,000 |
| Origination fee | 1.5% | $5,400 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $700 | $700 |
| Closing cost* | 2% | $7,200 |
| Total repayable amount | $392,300 |
*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 Rhode Island?
Due to the underwriting demands for this type of loan, few institutions in Rhode Island offer bridge loan products. Curious borrowers may want to check with several different lenders before applying. The most common sources include:
- Your mortgage lender
- Local banks
- Credit unions
- Hard-money lenders
- Non-qualified mortgage (non-QM) lenders
Are there alternatives to bridge loans in Rhode Island?
While a bridge loan might not work for every Rhode Island homeowner’s unique situation, there are alternatives to consider:
- Home equity loan: This type of loan (sometimes called a HEL) lets you 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 at its lower rate.
- Home equity line of credit (HELOC): Another option to use your existing equity is a HELOC. This allows you to withdraw money from your home at 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 may 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, a HELOC usually has an adjustable interest rate.
- Cash-out refinance: This loan allows you to 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 than for regular refinancing options, but lower than those for bridge loans. This is not a solution for everyone, though. For example, you cannot take out two owner-occupied loans within one year of each other. 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 take out a first mortgage and a second mortgage at the same time to fund your new purchase, meaning you would only need 10% down. For buyers who can’t make a large down payment before selling their previous property, this could be a solution that helps them avoid mortgage insurance costs. 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 pros and cons. 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, companies like HomeLight offer bridge-loan alternatives through programs designed to simplify buying and selling a home at the same time. These “Buy Before You Sell” programs can help you access your home equity before your current property sells, making it easier to move into your next home on your timeline.
Working alongside your Rhode Island real estate agent, HomeLight can help you buy your next home with greater confidence while giving your current home the opportunity to attract a strong offer once it hits the market. Ask your agent whether HomeLight Buy Before You Sell is available in your area.
Other companies that offer Buy Before You Sell or home trade-in style programs include Knock, Orchard, Flyhomes, and Homeward.
How does HomeLight Buy Before You Sell work?
Here’s how HomeLight’s Buy Before You Sell program works for home sellers in Rhode Island:
- Apply in minutes with no commitment: Find out if your property is a good match for the program and get your equity unlock amount approved in 24 hours or less. No cost or commitment required.
- Buy your dream home with confidence: Once you’re approved, you’ll gain 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, no matter how long it takes to find your dream home. The program’s near-instant Equity Unlock Calculator lets you estimate how much equity we can unlock from your current home.
- Sell your current place with peace of mind: After you move into your new home, we’ll list your unoccupied home on the market to attract the strongest offer possible. You’ll receive the remaining equity after the home sells.
Benefits of HomeLight Buy Before You Sell
- More flexibility: You don’t have to perfectly align your sale and purchase dates, giving you more control over your move.
- Less financial pressure: Avoid the stress of juggling temporary housing, multiple moves, or accessing savings to bridge the gap between homes.
- Stronger offers: A non-contingent offer can be more appealing to sellers, especially in a competitive market.
- Sell for up to 10% more: After you move out, your former home can be listed vacant and potentially staged, which HomeLight transaction data suggests may help increase the final sale price.
For Rhode Island homeowners caught in the buy-sell conundrum, HomeLight’s Buy Before You Sell program offers a convenient, low-stress solution. Learn more about the program at this link.
HomeLight also offers other services for homebuyers and sellers in Rhode Island, 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.
You might also try HomeLight’s Net Proceeds Calculator to estimate how much you could walk away with from your home sale.
A creative financing solution for Rhode Island homeowners
In Rhode Island’s competitive housing market, bridge loans can help homeowners buy their next home before selling their current one. By tapping into your existing home equity, a bridge loan can provide the funds needed to move forward without waiting for your current property to sell.
However, bridge loans aren’t the right fit for every situation. They often come with additional costs and qualification requirements.
If you’re looking for another way to buy and sell with less stress, HomeLight’s Buy Before You Sell program may be worth considering. HomeLight can also connect you with an experienced Rhode Island real estate agent who can help you evaluate your options and determine the best path forward.
Editor’s note: 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 Rhode Island, HomeLight encourages you to reach out to your own advisor.
Header Image Source: (stetsik / Deposit Photos)
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