What is a Bridge Loan?
A bridge loan is a temporary financing solution that allows homeowners to use equity from their current home while transitioning to a new property. These loans are typically used when timing the sale of an existing home and the purchase of a new one does not line up perfectly.
Bridge loans are most often used by buyers who want to make a non-contingent offer or who need funds for a down payment and closing costs before their current home sells. Depending on the structure, the bridge loan may be paid off once the existing home is sold.
In Nebraska markets such as Lincoln and Omaha, bridge loans are commonly used in competitive housing environments where buyers need flexibility and speed when purchasing their next home.
Potential Benefits of Bridge Loans
Bridge loans offer flexibility for homeowners navigating the sale and purchase of two properties.
Access home equity before selling
Bridge loans allow homeowners to tap into existing equity to fund a down payment or closing costs on a new home.
Stronger purchase offers
By reducing or eliminating sale contingencies, bridge loans can make offers more competitive in tight markets.
Flexible loan structures
Multiple bridge loan options are available depending on a borrower’s financial profile and goals.
Short-term financing solution
Bridge loans are designed as temporary tools, typically paid off once the existing home is sold.
Who Might Consider a Bridge Loan
Bridge loans may be a good fit for homeowners buying a new home before selling their current one.
- Move-up buyers purchasing a new primary residence
- Homeowners with significant equity in their current home
- Buyers competing in fast-moving Nebraska markets
- Borrowers seeking flexibility between transactions
Things to Consider
Bridge loans involve additional financing and qualification considerations.
- Borrowers may need to qualify for multiple payments
- Interest rates and costs may differ from long-term loans
- Timing of the home sale is important
- Not all bridge options are available in every scenario
- Eligibility for loan programs depends on your specific financial situation, credit profile, and property details. This information is for educational purposes only and does not constitute a commitment to lend.
Common Bridge Loan Options Available
Bridge loans are not one-size-fits-all. Depending on a borrower’s situation, several different structures may be available.
Standard bridge loan paying off the existing mortgage
This option pays off the current mortgage and releases equity to cover the down payment and costs on the new home. Borrowers must qualify carrying the new mortgage payment, the bridge loan, and any remaining obligations.
Second mortgage bridge loan
This structure places a second mortgage on the current home while keeping the first mortgage in place. Borrowers must qualify with all payments included in their debt ratios.
Buy-before-you-sell option
This option allows borrowers to tap into equity before selling their current home and may allow the existing housing payment to be excluded from debt ratios when purchasing the new home, depending on program guidelines.
Frequently Asked Questions About Bridge Loans
What is the main purpose of a bridge loan?
A bridge loan helps homeowners purchase a new home before selling their current one by providing short-term access to home equity.
Do borrowers need to qualify for two payments?
In many bridge loan scenarios, borrowers must qualify carrying multiple payments, though some buy-before-you-sell options may allow exclusions based on guidelines.
Are bridge loans available in Nebraska?
Yes. Bridge loans are available in Nebraska and are commonly used by buyers in Lincoln, Omaha, and surrounding areas.
How long is a typical bridge loan?
Bridge loans are short-term by design and are usually paid off once the existing home is sold. Six months to one year is common.