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

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

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

• Qualifying income: Your lender will assess your income to ensure you can handle payments on your current mortgage, your new mortgage, and potentially an interest-only payment on the bridge loan.
• Sufficient equity: It’s essential to have 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 needed for most bridge loan programs. A higher score can secure better interest rates and terms. If you have a good payment history, check with your current mortgage lender for potential bridge loan options.
• Your current home listed for sale: Many lenders require it to be on the market, ensuring it’s likely to be sold before the bridge loan term ends.

How much does a bridge loan cost in Maine?

In Maine, the cost of a bridge loan generally exceeds that of a standard mortgage. Interest rates on bridge loans are typically 1-3 percentage points higher than what you might find with a traditional mortgage. Additionally, bridge loans can incur extra transaction fees.

The reason for these higher costs is the increased risk to lenders. There’s always the possibility that your current home won’t sell within the expected timeframe, potentially leaving you with the financial responsibility of both your mortgage and bridge loan payments. It’s crucial to ensure you’re financially prepared for this scenario.

Your specific rate will depend on your credit score and the lender you choose.

How to reduce bridge loan costs

Applying for a bridge loan with the same lender as your new mortgage can cut costs. In such cases, you might not need to pay additional underwriting or mortgage fees, as your bridge loan and new mortgage will be processed together.

It’s beneficial to compare different lenders and bridge loan options. Bridge loans are a short-term solution, so consider what’s most financially viable and convenient for your situation.

Understanding these costs will help you better prepare for the financial aspects of securing a bridge loan in Maine.

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 Maine 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 $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 Maine?

In Maine, the availability of bridge loans may be more limited due to the specific underwriting requirements associated with this type of loan. Exploring options with various lenders is a good idea if you’re considering a bridge loan. The most common sources for bridge loans in Maine include:

• Your mortgage lender: Start with the lender of your current mortgage, as they already have a relationship with you.
• Local banks: Many local banks in Maine offer bridge loans and may provide more personalized service.
• Credit unions: These member-owned institutions often have competitive rates and may offer more flexible terms.
• Hard-money lenders: These are private investors or companies that offer loans based on property value rather than creditworthiness.
• Non-qualified mortgage (non-QM) lenders: These lenders provide loans that don’t meet the strict federal guidelines for mortgages, often allowing for more flexibility.

Some modern real estate companies also offer services to help you find a bridge loan, streamlining the gap between buying and selling a home. More details on this will be provided later in the post.

Are there alternatives to bridge loans in Maine?

While a bridge loan might not work for every Maine 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 than regular refinances but lower than 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 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 Maine. 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 Maine 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 Maine:

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 Maine 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 Maine, 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 Maine homeowners

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

Bridge loans offer the advantage of borrowing against the equity in your previous home, providing additional time to sell and reducing the stress of perfectly timing the transactions. This type of financing can be a highly convenient solution for homeowners navigating this transition. However, it’s important to remember that it can come with higher costs and may not be suitable for everyone.

Consider HomeLight’s Buy Before You Sell program for a more tailored approach. This innovative solution is designed to alleviate the uncertainty of your next home purchase. Additionally, HomeLight can connect you with a top-performing Maine real estate agent experienced in bridge loans and other home-buying strategies.

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