Bridge Loans in Charleston: How to Unlock Home Equity to Buy Before You Sell
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
Selling your Charleston home while shopping for a new one can feel like a juggling act. Timing the two transactions perfectly isn’t easy, especially when inventory is low and prices are high.
You might feel like your only option is to sell first, move out, and find a temporary place to live while you search for your next home. But there’s another way.
A bridge loan can help you buy a new home before selling your current one. This short-term financing option could be the piece you need to make your move smoother and less stressful.
In this post, we’ll break down how bridge loans work in Charleston and share other creative solutions to help you 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.
What is a bridge loan, in simple words?
When you’re buying a new home but still need to sell your old one, a bridge loan can help fill the financial gap. A bridge loan (sometimes called a swing loan or bridging loan) is a short-term loan that uses the equity in your current home to help you move forward with your next purchase.
With a bridge loan, you can tap into your home’s value to cover a down payment, closing costs, or other expenses tied to your new home. These loans usually come with higher interest rates than traditional mortgages, but they offer speed and convenience when timing is tight.
How does a bridge loan work in Charleston?
A common situation where you might use a bridge loan in Charleston is when you need to buy a new home before your current one sells. In this case, you would use the equity from your existing home to help cover your down payment and closing costs on the new property.
Often, the lender providing your new mortgage can also handle your bridge loan. They typically require that your current home be listed for sale and offer the bridge loan for a short term, usually six months to one year.
When reviewing your application, the lender may need to calculate your debt-to-income ratio. This calculation includes your current mortgage payment, your new mortgage payment, and an interest-only payment on the bridge loan.
However, if your old home is under contract and the buyer has final loan approval, your lender might only consider your new mortgage payment. Either way, the lender wants to be confident you can afford the payments on both homes if your old one doesn’t sell right away.
What are the benefits of a bridge loan in Charleston?
There are benefits to borrowing a bridge loan that can position you as a more flexible homebuyer in Charleston.
- You can make a non-contingent offer: A non-contingent offer helps you buy without waiting to sell your current home.
- You only have to move once: You can Move straight into your new home without the stress of finding temporary housing.
- You can prepare your old home for sale: Once you move out, it’s easier to prepare your old home for sale by cleaning, repairing, and staging it.
- Some lenders don’t require payments during the loan period. For example, you might not have to make bridge loan payments until your home sells.
- You can move on the right property quickly: You can act fast on a new home without worrying about the status of your old one.
What are the drawbacks of a bridge loan?
While a bridge loan can increase your flexibility and reduce stress when buying and selling, there are some drawbacks to consider.
- Additional loan costs: Expect fees like underwriting, origination, and administrative costs added to the loan balance.
- Added financial stress: You could face paying two mortgages and a bridge loan at the same time, even if the latter is interest-only.
- Qualifying may be more difficult: Lenders often have stricter requirements compared to a traditional mortgage.
- Underwriting can be slower: The approval process might take longer than you expect, especially if documents need extra review.
In addition to reviewing your monthly income, lenders will also look at how much equity you have in your current home. If you owe more than 80% of your home’s value, you might not qualify for a bridge loan.
When is a bridge loan a good solution?
A bridge loan isn’t a blanket solution for every real estate situation, but for some Charleston sellers, it can ease the stress of moving from an old home to a new one.
Some examples of when a bridge loan might be a fitting solution include:
- You need the equity from your current home to cover the down payment on a new purchase.
- You can’t afford a double move and interim housing, and lining up the sale and purchase timelines is essential.
- Your dream home just came on the market, and you want to act quickly without waiting for your home to sell.
- Your home sale contingency is blocking your offer from being accepted, and you need immediate purchasing power.
- You cannot fully move out, clean, or list your old home in its best light without leaving first, and you want a staged home to attract better offers.
What’s required to get a bridge loan in Charleston?
To qualify for a bridge loan in Charleston, you typically need the following:
- Qualifying income: Your lender will review your income to make sure you can handle payments on both homes and the bridge loan.
- Sufficient equity: You should have at least 20% equity in your current home, though some lenders may require up to 50%.
- Good credit history: A credit score above 650 is often needed. A higher score can help you secure better terms and rates.
- Your current home to be listed for sale: Some lenders will want proof that your home is on the market to confirm it will sell soon.
How much does a bridge loan cost in Charleston?
Below is an example of how much a $300,000 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 Charleston house to sell. The new home’s asking price is $630,000. You can only come up with $330,000, but you have at least another $300,000 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 | $300,000 | $300,000 |
| Interest (varies) | 10% (example for 6 months) | $15,000 |
| Origination fee | 1.5% | $4,500 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $700 | $700 |
| Closing cost* | 2% | $6,000 |
| Total repayable amount | $327,200 |
*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 Charleston?
Due to the underwriting demands for this type of loan, you may find that fewer institutions in Charleston offer bridge loan products. Curious borrowers may want to check with a variety of lenders before submitting an application. The most common sources include:
- Your 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 help you secure a bridge loan to fill the gap between buying and selling. We’ll share how this works later in this post.
Are there alternatives to bridge loans in Charleston?
While a bridge loan might not work for every Charleston 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 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, 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 refinancing options 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, real estate solution companies like HomeLight incorporate bridge loans into convenient programs that streamline the process of buying and selling a house simultaneously in Charleston. 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 Charleston 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 Charleston:
- 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 Charleston 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 Charleston, such as Agent Match, which helps you find the top-performing real estate agents in your market, and Simple Sale, which provides 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 Charleston homeowners
As Charleston homebuyers face a competitive market and rising prices, many are using bridge loans to help ease the pressure of buying a new home while selling their old one.
A bridge loan lets you borrow against the equity in your current home to help fund your next purchase, giving you more time and flexibility to sell. However, bridge loans can be costly and may not be the right fit for everyone.
Consider HomeLight’s Buy Before You Sell program to simplify your next move. HomeLight can also connect you with a top Charleston buyer’s agent who has experience helping clients through the bridge loan process.
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 Charleston, HomeLight encourages you to reach out to your own advisor.
Header Image Source: (sepavone / Deposit Photos)
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