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

What’s required to get a bridge loan in Miami?

To qualify for a bridge loan in Miami, there are several key requirements you’ll need to meet:

• Qualifying income: Lenders will assess your income to ensure you can manage payments on your existing mortgage, the new one, and the bridge loan.
• Sufficient equity: You’ll usually need at least 20% equity in your current home, though some lenders may require up to 50%.
• Good credit history: A good credit score, usually above 650, is required. This influences your interest rate and other factors, like the loan-to-value ratio. A higher score is always better.
• Your current home listed for sale: Many lenders require that your current home is already on the market, as this assures them it’s likely to sell during the bridge loan term.

How much does a bridge loan cost in Miami?

A bridge loan in Miami typically carries a higher interest rate than standard mortgages, with rates ranging from 1-3 percentage points more than a typical mortgage loan. These loans may also include additional fees due to their nature and the increased risk they pose to lenders.

The heightened costs reflect the risk that your current home might not sell within the expected timeframe, necessitating mortgage and bridge loan payments. It’s crucial to be financially prepared for this scenario.

Your specific rate will largely depend on your creditworthiness and the lender you choose.

How to reduce bridge loan costs

If you’re obtaining a bridge loan from the same lender as your new mortgage, you might be able to avoid extra underwriting or mortgage fees, as both loans will be processed together. It’s good to compare different lenders and loan options, considering the total costs, convenience, and suitability for your situation.

Budget for closing costs

In addition to interest rates and fees, be prepared to pay closing costs and other legal and administrative expenses. These 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

Closing costs can add significantly to your overall expenses, so they are important to budget for these as part of the total cost of your bridge loan in Miami.

Bridge loan cost example

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 Miami house to sell. The new home’s asking price is $700,000. You can only come up with $400,000, 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.

*These closing costs typically range between 1.5%-3% 

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Who provides bridge loans in Miami?

Not all financial institutions offer bridge loans due to their specific underwriting requirements. However, if you’re interested in obtaining a bridge loan, there are several types of lenders you can approach. The most common sources for bridge loans in Miami include:

• Your current mortgage lender
• Local banks
• Credit unions
• Hard-money lenders
• Non-qualified mortgage (non-QM) lenders

Additionally, some modern real estate companies have streamlined the process of securing a bridge loan-making it easier to bridge the gap between buying and selling a home. We’ll explore how these companies operate later in this post.

Are there alternatives to bridge loans in Miami?

While a bridge loan might not work for every Miami 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?

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 Miami. 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.

With your Miami 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.

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 Miami:

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 can 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 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.

For Miami 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 Miami, 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 Miami homeowners

As Miami homeowners face the challenges of a tight housing market and escalating home prices, many are considering bridge loans to streamline the process of buying a new home while selling their old one.

Bridge loans offer the advantage of borrowing against the equity in your previous home, which can be applied towards purchasing your new property. This flexibility provides more time to sell your old home, alleviating much of the stress of getting the timing right.

However, while bridge loans can offer significant convenience in transitioning to a new home, they can also be costly and might not suit everyone’s financial situation.

If you want a more streamlined approach, consider exploring HomeLight’s Buy Before You Sell program. This program is designed to reduce the uncertainty in your next home purchase. HomeLight can also connect you with a highly skilled Miami real estate agent experienced in navigating the complexities of bridge loans.

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