Georgia Homeowners: Unlock Equity and 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 tightrope of selling your old home and buying a new one in Georgia can be a daunting challenge. The balancing act becomes even more intricate when faced with low inventory and high prices in today’s real estate market. You might find yourself in a predicament where it seems the only option is to sell your home, move out, and temporarily relocate while you hunt for your new dream house. But there’s a smoother path to consider.
A bridge loan could be the key solution you’re searching for. As a short-term financing option, bridge loans offer the unique advantage of helping you purchase your new home before you’ve sold your old one. This innovative solution might just be the missing piece in your home buying and selling puzzle.
In this post, we’ll provide tips and insights about bridge loans in Georgia and how to Buy Before You Sell.
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 Georgia, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan?
A bridge loan is a lifeline when you’re in the thick of transitioning from your current home to your next one. Essentially, it’s a short-term loan that offers you the necessary funds to secure your new property before your existing home sells. This type of loan leverages the equity in your current home, giving you the financial flexibility to make a down payment and handle closing costs on your new purchase.
Picture a bridge loan as your financial stepping stone. It serves to “bridge” the often tricky gap between the sale of your old home and the acquisition of your new one.
Typically, bridge loans are structured to last between six months to a year, though the exact duration can vary based on your unique financial situation and the specific policies of your lender. Due to their temporary nature and the inherent risks involved, bridge loans usually carry slightly higher interest rates compared to traditional mortgages.
How does a bridge loan work in Georgia?
In Georgia, a typical scenario where you might consider a bridge loan is when you’re eager to snap up your new dream home before your current one has found a buyer. In this situation, the equity from your existing home becomes your financial springboard, covering the down payment and closing costs for your new abode.
Often, the same lender who’s working with you on your new mortgage will also facilitate your bridge loan. They usually require that your current home is already on the market and offer the bridge loan for a period ranging from six months to a year.
A critical aspect your lender will assess is your debt-to-income ratio (DTI). This calculation takes into account the mortgage payments on both your old and new homes, along with the interest-only payments on the bridge loan (if applicable).
However, if your current home is already under contract and the prospective buyer has secured their loan, your lender might only consider the mortgage payment on your new Georgia home in the DTI equation.
What are the benefits of a bridge loan in Georgia?
Bridge loans in Georgia come with several advantages that can make your homebuying experience smoother and more flexible:
- Make a non-contingent offer on your new home
- Only one move required, from old to new home
- Prepare your old home for sale stress-free after moving
- Some lenders offer no payments during the loan period
- Act fast on ideal properties, regardless of current home’s sale status
These benefits collectively position a bridge loan as a practical and strategic choice for Georgia homebuyers who may be financially stretched before selling their previous property. With a bridge loan, the proceeds from the sale of your old home can comfortably cover the loan repayment.
What are the drawbacks of a bridge loan?
Bridge loans, while offering flexibility and solutions in certain situations, also come with their own set of challenges:
- Additional loan costs, such as underwriting and origination fees
- Potential financial strain from multiple mortgage payments simultaneously
- More stringent qualifying criteria than traditional mortgages
- Slower underwriting process compared to standard loans
- Equity requirements: owing more than 80% of your home’s value may disqualify you
These drawbacks highlight the importance of carefully considering your financial situation and consulting with a financial advisor before opting for a bridge loan.
When is a bridge loan a good solution?
A bridge loan may not be the universal answer for all real estate deals, but in certain circumstances, it can significantly ease the transition from an old home to a new one:
- Equity from your current home needed for the new home’s down payment.
- To avoid the costs and hassle of a double move and temporary housing.
- When your ideal home is on the market and you need to act fast.
- If home sale contingencies in your offers are hindering your buying process.
- Ideal for selling an empty or staged home, which can be more profitable and easier.
Especially relevant if you’re unable to prepare or stage your current home for sale while still residing in it. A bridge loan allows you the financial freedom to move out and showcase your home in the best light, potentially leading to a faster sale and better offers.
What’s required to get a bridge loan in Georgia?
To be eligible for a bridge loan in Georgia, you’ll generally need to meet these key criteria:
- Qualifying income: Lenders will assess your income to ensure you can manage payments on your existing mortgage, new mortgage, and potential bridge loan interest.
- Sufficient equity: It’s essential to have at least 20% equity in your current home; some lenders might ask for as much as 50%.
- Good credit history: A good credit score, typically above 650, is crucial for approval. This score also affects your interest rate and other loan terms.
- Your current home listed for sale: While not always mandatory, some lenders require proof that your current home is on the market, helping to ensure its sale within the bridge loan’s duration.
How much does a bridge loan cost in Georgia?
In Georgia, the cost of a bridge loan generally exceeds that of a standard mortgage. Expect interest rates to be 1-3 percentage points higher than typical mortgage rates. Alongside higher interest rates, bridge loans often come with additional transaction fees.
This increased cost reflects the lender’s heightened risk, considering the uncertainty of when your current home will sell. It’s important to be financially prepared to manage both mortgage and bridge loan payments, particularly if your home doesn’t sell within the anticipated timeframe.
Your specific interest rate will largely depend on your credit score and the lender you choose.
How to reduce bridge loan costs
Consolidating your bridge loan with your new mortgage under the same lender can save you from additional underwriting and other mortgage fees. Both loans can be underwritten and approved simultaneously, offering potential savings.
Shopping around is key. Bridge loans are meant as a short-term fix, so it’s vital to choose an option that not only suits your financial needs but also offers convenience and aligns with your specific circumstances. We’ll explore more financing options in a subsequent section.
Budget for closing costs
Closing costs, legal, and administrative fees are additional expenses to consider. These costs typically range from 1.5% to 3% of the loan amount and may 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 $200,000 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 Georgia house to sell. The new home’s asking price is $350,000. You can only come up with $150,000, but you have at least another $200,000 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 | $200,000 | $200,000 |
| Interest (varies) | 10% (example for 6 months) | $10,000 |
| Origination fee | 1.5% | $3,000 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $500 | $500 |
| Closing cost* | 2% | $4,000 |
| Total repayable amount | $218,500 |
*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 Georgia?
In Georgia, the availability of bridge loans may be somewhat limited due to the specific underwriting requirements associated with this type of loan. If you’re considering a bridge loan, it’s advisable to explore options with various lenders. The most common sources for bridge loans in Georgia include:
- Your mortgage lender
- Local banks
- Credit unions
- Hard-money lenders
- Non-qualified mortgage (non-QM) lenders
Additionally, some modern real estate companies specialize in facilitating bridge loans, simplifying the process of bridging the gap between buying and selling a home. More details on this will be covered later in the post.
Are there alternatives to bridge loans in Georgia?
While a bridge loan might not work for every Georgia homeowner’s unique situation, there are alternatives to consider:
- Home equity loan: This kind of loan (often 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 Georgia. 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 Georgia 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 Georgia:
- 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.
- 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.
- 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 Georgia 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 Georgia, 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 Georgia homeowners
As Georgia homeowners face the challenges of low inventory and high home prices, many are turning to bridge loans as a strategic solution to streamline the process of buying a new home while selling the old one.
Bridge loans enable homeowners to use the equity in their previous property, easing the financial burden and timing constraints associated with simultaneous buying and selling. This method offers homeowners the luxury of time, reducing the stress of having to sell quickly.
However, while bridge loans can be a highly convenient option during this transition, they do come with their costs and might not be suitable for every situation.
For a more tailored approach, consider HomeLight’s Buy Before You Sell program, designed to alleviate the uncertainties of your next home purchase. HomeLight can also connect you with a top-performing Georgia buyer’s agent with experience in bridge loans.
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