Bridge Loans in Tennessee: How to Unlock Home Equity to Buy Before You Sell
- Published on
- 12 min read
-
Joseph Gordon EditorClose
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 current home while trying to buy your next one can feel like walking a financial tightrope. The process demands careful timing, especially in Tennessee, where tight inventory and high prices add to the challenge. You might feel like your only option is to sell, move out, and find a temporary place to stay while you look for a new home.
But what if there was a way to simplify this balancing act? A bridge loan could be the solution you’re looking for. This short-term financing option helps you purchase a new home before selling your old one, giving you more flexibility and peace of mind.
In this guide, we’ll explain how bridge loans work and when they might be the right fit for Tennessee homeowners.
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 Tennessee, HomeLight encourages you to reach out to your own advisor.
What is a bridge loan, in simple words?
When it comes to real estate, a bridge loan is a short-term financing option designed to help you transition between selling your current home and buying a new one. By leveraging the equity in your existing property, a bridge loan gives you access to cash for a down payment and other upfront costs for your next home purchase.
Though often more expensive than traditional mortgages, bridge loans are valued for their speed and convenience, helping you avoid the hassle of waiting for your current home to sell.
Bridge loans are also commonly referred to as:
- bridge financing
- bridging loans
- interim financing
- gap financing
- swing loans
How does a bridge loan work in Tennessee?
A common scenario where a Tennessee homeowner might need a bridge loan is when you need to purchase a new home before your current one sells. In this case, a bridge loan allows you to tap into the equity of your existing home to cover the down payment and closing costs for your next property.
Often, the lender handling your new mortgage can also provide the bridge loan. Typically, they require your current home to be listed on the market and offer the bridge loan for a term of six months to one year.
Your lender will also review your debt-to-income ratio (DTI), which includes the payments for your current mortgage, the new mortgage, and potentially the interest-only payment on the bridge loan. If your existing home is under contract and the buyer has loan approval, your lender may focus solely on your new mortgage payment in their calculations.
Lenders aim to ensure you can handle the financial obligations of both properties if your current home doesn’t sell as quickly as expected.
What are the benefits of a bridge loan in Tennessee?
There are several benefits to using a bridge loan that can help you as a Tennessee homebuyer.
- You can make a non-contingent offer: Strengthen your offer by removing the need to sell your current home first.
- You only have to move once: Skip the hassle of finding temporary housing between buying and selling.
- You can prepare your old home: Move out and focus on staging to attract buyers.
- Some lenders don’t require payments during the loan period: This reduces financial stress while managing both properties.
- You can move on the right property quickly: Act fast without worrying about the sale status of your current home.
What are the drawbacks of a bridge loan?
While a bridge loan can provide valuable flexibility when buying and selling a home, it does come with some drawbacks:
- Additional loan costs: Expect to pay underwriting fees, origination fees, and other upfront expenses.
- Added financial stress: Managing two mortgages and a bridge loan, even if interest-only, can stretch your budget.
- More difficult qualification: Approval can be tougher than for a traditional mortgage loan.
- Potential delays in underwriting: The process might take longer than anticipated, causing frustration.
Lenders will also evaluate the equity in your current home. If you owe more than 80% of its value, you may not qualify for a bridge loan.
When is a bridge loan a good solution?
A bridge loan isn’t a one-size-fits-all solution, but it can be a lifesaver for certain real estate situations.
Some scenarios where a bridge loan might be a good solution include:
- You need the equity from your current home to fund a down payment for your new home.
- You can’t afford the cost or hassle of a double move and temporary housing.
- Your ideal home just became available, and you need to act quickly to secure it.
- Your offer’s home sale contingency has been an obstacle, and you want immediate purchasing power.
- You’re unable to prepare or stage your home while living in it, and want the benefits of selling a staged home, which often sells faster and for a better price.
What’s required to get a bridge loan in Tennessee?
To qualify for a bridge loan in Tennessee, you typically need the following:
- Qualifying income: Lenders will review your income to ensure you can handle payments for both mortgages and the bridge loan.
- Sufficient equity: Most lenders require at least 20% equity in your current home, though some may expect up to 50%.
- Good credit history: A credit score above 650 is often necessary, with higher scores potentially lowering your interest rate.
- Your current home to be listed for sale: Many lenders require proof your home is on the market to ensure it will sell during the loan term.
How much does a bridge loan cost in Tennessee?
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 Tennessee house to sell. The new home’s asking price is $400,000. You can only come up with $100,000, 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 selling your new home 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 | $700 | $700 |
| Closing cost* | 2% | $6,000 |
| Total repayable amount | $220,700 |
*These closing costs typically range between 1.5%-3%
What's Your Tennessee Home Worth Today?
Tell us about your property and get a preliminary value estimate on your Tennessee home in as little as two minutes.
Who provides bridge loans in Tennessee?
Due to the unique underwriting requirements of bridge loans, you may find that fewer institutions in Tennessee offer these products. However, potential borrowers can explore various options before applying. The most common sources 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 streamlining the process of securing a bridge loan to help you bridge the gap between buying and selling a home. We’ll explain how this works later in this post.
Due to the unique underwriting requirements of bridge loans, you may find that fewer institutions in Tennessee offer these products. However, potential borrowers can explore various options before applying. The most common sources 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 streamlining the process of securing a bridge loan to help you bridge the gap between buying and selling a home. We’ll explain how this works later in this post.
Are there alternatives to bridge loans in Tennessee?
While a bridge loan might not work for every Tennessee 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 Tennessee. 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 Tennessee 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 Tennessee:
- 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 Tennessee 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 Tennessee, 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 Tennessee homeowners
As Tennessee homeowners manage a competitive housing market, many are exploring bridge loans to ease the transition between buying a new home and selling their old one.
Bridge loans allow you to tap into the equity of your current home to fund your next purchase, offering flexibility and reducing the stress of timing the sale and purchase perfectly. However, this type of financing can be costly and may not suit everyone’s needs.
Consider HomeLight’s Buy Before You Sell program for a streamlined alternative that simplifies your home-buying journey. With HomeLight, you can also connect with a top-performing Tennessee buyer’s agent experienced in bridge loans to guide you through this process with confidence.
Header Image Source: (Kelly / Pexels)
- "What is the difference between a Home Equity Loan and a Home Equity Line of Credit (HELOC)?," onsumer Financial Protection Bureau (January 2025)
- "What is a “piggyback” second mortgage?," Consumer Financial Protection Bureau (September 2024)
- "Can you borrow from your 401(k)? Rules, interest rates, and loan details," Business Insider, Tessa Campbell & Choncé Maddox (August 2024)
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.