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

These benefits make a bridge loan a practical solution for Missouri buyers needing financial flexibility before accessing the equity from their previous home’s sale.

What are the drawbacks of a bridge loan?

While bridge loans can offer increased flexibility and ease some of the stress associated with buying a new home and selling your current one, they also come with certain drawbacks:

When is a bridge loan a good solution?

A bridge loan isn’t a one-size-fits-all solution in real estate, but it can significantly ease the transition between selling an old home and buying a new one for some homeowners. Here are scenarios where a bridge loan might be advantageous:

• You need the equity from your current home to make a down payment on a new one.
• Affording a double move and temporary housing isn’t feasible, making bridging the sale and purchase timelines crucial.
• You’ve found your dream home and must act quickly to avoid losing out in a competitive market.
• Home sale contingencies have hindered your offers, and you need more immediate purchasing power.
• Your goal is to sell your home empty or staged, which can be more profitable and easier to manage. This is especially relevant if preparing or staging your current home for sale is impractical while you’re still living in it. An unoccupied, well-presented home can significantly enhance its appeal and value on the market.

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

To qualify for a bridge loan in Missouri, you typically need to meet the following criteria:

• Qualifying income: Lenders will assess your income to ensure you can afford payments on your current mortgage, new mortgage, and bridge loan payments.
• Sufficient equity: You need at least 20% equity in your current home, though some lenders may require as much as 50%.
• Good credit history: A favorable credit score, usually above 650, is often required. Your credit score affects your interest rate and other loan terms.
• Your current home listed for sale: Some lenders may need proof that your current home is on the market, ensuring it’s likely to be sold during the bridge loan term.

How much does a bridge loan cost in Missouri?

In Missouri, a bridge loan typically has a higher interest rate than a standard mortgage. You can expect to pay about 1-3 percentage points more than you might for a regular mortgage loan. Additionally, bridge loans often include various transaction fees.

These higher costs are the increased risk taken on by lenders. If your home doesn’t sell within the expected timeframe, and you need to start making payments on your bridge loan, it’s crucial to be financially prepared to handle your mortgage and bridge loan payments simultaneously.

The specific rate you’ll get largely depends on your creditworthiness and the lender you choose.

How to reduce bridge loan costs

Applying for a bridge loan with your new mortgage’s same lender can reduce costs. In such cases, you might not have to pay additional underwriting or other mortgage-related fees, as your bridge loan and new mortgage will be processed together.

It’s advisable to explore different options and compare them. Remember, bridge loans are meant as a short-term solution. Choose what’s cost-effective, convenient, and suitable for your specific situation. We’ll discuss more alternatives in a later section.

Budget for closing costs

Besides the loan, you’ll also need to budget for closing costs and other legal and administrative fees. These 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 $150,000 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 Missouri house to sell. The new home’s asking price is $270,000. You can only come up with $120,000, but you have at least another $150,000 worth of equity in your current property. You want to access that money to cover the shortfall before selling your new home to another buyer.

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

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Who provides bridge loans in Missouri?

In Missouri, while not all financial institutions offer bridge loans due to their specific underwriting requirements, there are several places where prospective borrowers can inquire:

• Your mortgage lender: Start with the lender of your current mortgage; they might offer bridge loans, especially if you have a good payment history.
• Local banks: Many community banks in Missouri provide bridge loans with varying terms and conditions.
• Credit unions: Member-owned credit unions often offer their members competitive rates for bridge loans.
• Hard-money lenders: These lenders can be a source for bridge loans, especially for borrowers looking for more flexible terms.
• Non-qualified mortgage (non-QM) lenders: These lenders offer loans that don’t meet the standard federal guidelines, including bridge loans.

Some modern real estate companies offer services to help you secure a bridge loan, simplifying the transition between buying and selling a home. More details on this will be discussed later in the post.

Are there alternatives to bridge loans in Missouri?

While a bridge loan might not work for every Missouri 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 at its lower rate.
• Home equity line of credit (HELOC): Another option to use your existing equity is a HELOC. This lets you pull money out of your property for a relatively low interest rate. Instead of receiving the money immediately, 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 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?

Real estate solution companies like HomeLight incorporate bridge loans into convenient programs that streamline the process of buying and selling a house simultaneously in Missouri. These “Buy Before You Sell” programs can provide a more complete “bridge” to help you complete your move to a new home, thereby reducing stress and worry.

With your Missouri 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 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 Missouri:

1. Talk to a loan officer to get qualified and approved: 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. House hunting and close on new home: Once 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 home.
3. Sell your former home with peace of mind: After you move into your new home, work with a top agent to 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.

HomeLight’s Buy Before You Sell program is available in most states throughout the country.

For Missouri 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 Missouri, such as Agent Match, which helps you 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 Missouri homeowners

As Missouri homeowners face the challenges of a dynamic real estate market, bridge loans emerge as a strategic tool for those looking to balance the act of buying a new home while selling the old one. These loans offer the flexibility to leverage the equity in your current home, providing a smoother transition and potentially more negotiating power in a competitive market.

However, it’s important to remember that bridge loans, with their higher costs and specific requirements, may not be the perfect fit for everyone. This is where exploring alternatives becomes crucial. Programs like HomeLight’s Buy Before You Sell offer innovative solutions, streamlining the bridge loan process and offering a more tailored approach to your unique situation.

Ultimately, the right financing option for you in Missouri hinges on a blend of your financial standing, home equity, and plans. With careful consideration and the proper guidance, you can navigate this transition with confidence and ease.

For a more streamlined and potentially less uncertain option, consider HomeLight’s Buy Before You Sell program. This innovative approach can ease the uncertainty of your next home purchase. Additionally, HomeLight can connect you with a top-performing Missouri real estate agent experienced in handling bridge loans and other alternative financing solutions.

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