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

What’s required to get a bridge loan in San Francisco?

To secure a bridge loan in San Francisco, you’ll typically need:

• Qualifying income: Lenders assess your income to ensure you can handle payments on your current and new mortgages and potentially the bridge loan.
• Sufficient equity: At least 20% equity in your current home is necessary, though some lenders might require more.
• Good credit history: A credit score above 650 is often required, influencing your interest rate and other factors like the loan-to-value ratio.
• Your current home listed for sale: Some lenders might need proof that your current home is on the market.

How much does a bridge loan cost in San Francisco?

Bridge loans in San Francisco generally have higher interest rates than standard mortgages, often 1-3 percentage points more. They also include additional fees.

The cost reflects the increased risk for lenders, considering your home might not sell as quickly as needed. Being financially prepared for simultaneous mortgage and bridge loan payments is important so you don’t end up unexpectedly underwater.

How to reduce bridge loan costs

Working with the same lender for your bridge loan and new mortgage can save on underwriting and other fees. Shopping around is key to finding the most cost-effective option.

Budget for closing costs

Remember to budget for closing costs and fees, typically 1.5% to 3% of the loan amount, including appraisal, administration, escrow, title policy, notary, and loan origination fees.

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 San Francisco house to sell. The new home’s asking price is $1,200,000. You can only come up with $900,000, 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 San Francisco?

In San Francisco, bridge loans are offered by:

• Your mortgage lender
• Local banks
• Credit unions
• Hard-money lenders
• Non-QM lenders

Are there alternatives to bridge loans in San Francisco?

While a bridge loan might not work for every San Francisco 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?

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 San Francisco. 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 San Francisco 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 San Francisco:

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 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.
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 San Francisco 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 San Francisco, 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 San Francisco homeowners

As San Francisco homebuyers face a tight housing market and soaring prices, bridge loans are emerging as a popular solution for seamlessly transitioning from an old to a new home. These loans enable homeowners to borrow against their existing home’s equity, offering more time to sell and reducing the hassle of precise timing.

However, bridge loans can be expensive and aren’t suitable for everyone. Alternatives like HomeLight’s Buy Before You Sell program offer innovative solutions, and HomeLight can connect you with experienced San Francisco agents who are well-versed in bridge loans.

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