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

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

What are the drawbacks of a bridge loan?

While a bridge loan can be a valuable tool in your home-buying arsenal, it’s important to know its potential drawbacks.

When is a bridge loan a good solution?

A bridge loan isn’t always the go-to solution for every real estate situation. Still, depending on your circumstances, it can significantly ease the transition from your old home to a new one.

• You need the equity from your current home for a new home’s down payment.
• Avoiding the cost and hassle of a double move and temporary housing is a priority.
• Your ideal home is on the market, and you must act fast to avoid missing out.
• Home sale contingencies in your offers have been deal-breakers, and you need more immediate buying power.
• You aim to sell your current home empty or staged, which can often appeal to buyers and potentially be more profitable.

When you cannot prepare or stage your current home while still living there, a bridge loan can provide the necessary funds to move into your new home. This allows you to vacate and prepare your old home for the market, potentially leading to a quicker sale and a better selling price.

What’s required to get a bridge loan in North Carolina?

To qualify for a bridge loan in North Carolina, 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: At least 20% equity in your current home is necessary, though some lenders may require as much as 50%.
• Good credit history: A favorable credit score, usually above 650, is essential. This score influences your interest rate and other factors like loan-to-value ratio. The higher your score, the better your terms might be.
• Your current home listed for sale: Some lenders require proof that it is on the market, ensuring it’s likely to sell before the bridge loan term ends.

How much does a bridge loan cost in North Carolina?

In North Carolina, the cost of a bridge loan typically carries a higher interest rate compared to a standard mortgage. You can expect interest rates to be about 1 to 3 percentage points higher than what you might qualify for on a traditional mortgage loan. Additionally, bridge loans often come with extra transaction fees.

The increased cost is due to the higher risk associated with bridge loans. It’s important to consider that your current home may not sell within the expected timeframe, potentially leaving you responsible for your mortgage and bridge loan payments.

Your specific rate will largely depend on your creditworthiness 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 reduce costs. In such cases, you might not need to pay additional underwriting or other mortgage fees, as your bridge loan and new mortgage will be processed together.

It’s advisable to compare different lenders and bridge loan options. Remember, bridge loans are meant as a short-term solution, so it’s crucial to find an option that offers favorable financial terms and aligns with your specific needs and circumstances.

These fees can add up, so factoring them into your overall financial planning when considering a bridge loan is important.

Bridge loan cost example

Below is an example of how much a $100,000 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 North Carolina house to sell. The asking price for the new home is $400,000. You can only come up with $300,000, but you have at least another $100,000 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% and 3%. 

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Who provides bridge loans in North Carolina?

In North Carolina, the availability of bridge loans may be somewhat 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 this financing solution. The most common sources for bridge loans in the state include:

• Your mortgage lender: Start with the institution where you have your current mortgage, as they may offer bridge loans to existing customers.
• Local banks: Many community banks in North Carolina provide personalized lending services, including bridge loans.
• Credit unions: Member-owned credit unions often have competitive loan options and may offer more favorable terms.
• Hard-money lenders: Hard money lending institutions in North Carolina offer loans based on property value rather than solely on borrower creditworthiness.
• Non-qualified mortgage (non-QM) lenders: These lenders offer loans that don’t meet the strict federal guidelines for mortgages, which can include bridge loans.

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 North Carolina?

While a bridge loan might not work for every North Carolina 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 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 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 lets you avoid early withdrawal fees, but 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 North Carolina. 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 North Carolina 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 North Carolina:

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’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 North Carolina 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 North Carolina, 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 North Carolina homeowners

As North Carolina homebuyers grapple with a competitive housing market and rising home prices, many are considering bridge loans to streamline buying a new home while selling their old one. This solution offers the advantage of borrowing against the equity in your previous home, providing a financial cushion that allows for more flexibility in timing your sale. This can significantly reduce the stress of aligning the sale of your old home with the purchase of your new one.

However, while bridge loans can offer a convenient solution during this transition, they can also be expensive and unsuitable for everyone’s financial situation. Consider HomeLight’s Buy Before You Sell program for a more streamlined approach. This innovative option can alleviate the uncertainty surrounding your next home purchase.

Additionally, HomeLight can connect you with a top-performing North Carolina agent who is experienced in navigating the complexities of bridge loans and alternative financing solutions.

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