Thinking about moving up in Maplewood but worried you need to sell first? You are not alone. In a competitive market with tight inventory, waiting can cost you the right house. The good news is you may be able to buy your next home without a sale contingency by tapping the equity you already have. In this guide, you will learn how bridge loans and other short-term options work, what lenders look for, example numbers, and a simple plan to move with confidence. Let’s dive in.
Why buy-before-you-sell in Maplewood
Maplewood often sees strong demand compared to available homes. Sellers tend to favor offers without a sale contingency because they are simpler and more certain. If you need your current home’s equity for a down payment, a short-term financing strategy can help you write a cleaner offer.
Buying before you sell can also reduce stress. You avoid trying to time two closings on the same day and you can move on your schedule. If you have stable income, good credit, and solid equity, these tools may be a good fit.
What is a bridge loan
A bridge loan is a short-term loan that taps the equity in your current home to fund the down payment or purchase of your next home. Most terms run 3 to 12 months, often with interest-only payments, and you repay when your current home sells or at the end of the term.
- Benefits: fast access to cash, stronger non-contingent offers, sometimes a path to convert into a permanent mortgage.
- Tradeoffs: higher rates and fees than a standard mortgage or HELOC, lender may require proof you intend to sell, and the loan is typically secured by your current home.
- Good fit when: you want a single, short-term solution to make a competitive offer without waiting for your sale proceeds.
Other short-term options
HELOC on your current home
A HELOC is a revolving line of credit secured by your current home. You draw only what you need, and many HELOCs are interest-only during the draw period.
- Benefits: flexible borrowing and typically lower closing costs than a closed bridge product.
- Tradeoffs: variable rates are common and lenders may cap the total amount you can draw based on combined loan-to-value.
- Good fit when: you want flexibility, expect your sale to happen in a few months, and prefer to pay interest only on what you borrow.
Cash-out refinance or bridge-to-perm
A cash-out refinance replaces your current mortgage and gives you cash for the next down payment. Some lenders also offer a simultaneous close that pairs short-term funds with your permanent loan.
- Benefits: long-term rate certainty and you may avoid carrying two mortgages if timing works.
- Tradeoffs: higher closing costs and more time to underwrite than a HELOC or bridge.
- Good fit when: you can secure favorable long-term terms and want to avoid an additional short-term loan.
Temporary second mortgage
A temporary second mortgage is a short-term subordinate loan on the new home while your current home is still for sale. Structures vary and can resemble a bridge loan.
- Benefits and tradeoffs: similar to bridge loans, with added complexity due to lien position and combined underwriting.
Recast after you sell
A recast is not a new loan. After you make a large principal payment on your new mortgage, your lender re-amortizes the loan so your monthly payment drops. Your interest rate stays the same.
- Benefits: low cost and you keep your existing rate.
- Tradeoffs: not all lenders allow recasts and this does not change your rate.
- Good fit when: you buy with a bridge or HELOC, then use sale proceeds to lower your payment later.
Example numbers: how it can work
Below are simplified, hypothetical scenarios. Actual rates, fees, and approvals vary by lender and market conditions.
Example A: Bridge loan for down payment
- Current home value: $700,000; mortgage balance: $300,000; estimated equity: $400,000.
- New home price: $900,000. Desired 20 percent down payment: $180,000.
- If a lender allows up to 80 percent combined loan-to-value on the current home, total secured debt could be up to $560,000. With a $300,000 balance, you may access up to $260,000 for a bridge loan.
- Bridge amount: $180,000. If the interest rate is 8 percent, interest-only payments would be about $1,200 per month. If you sell in 3 months, total interest would be about $3,600 plus any fees.
Example B: HELOC as the bridge
- Same property values. You open a $200,000 HELOC and draw $180,000 for the down payment.
- You pay interest only on the amount drawn. Payments can be lower than a closed bridge but are subject to a variable rate.
- If you sell in 6 months, you repay the HELOC from the proceeds and close the line if desired.
Example C: Recast after sale
- You buy first using a bridge or HELOC. After selling, you apply $150,000 to your new mortgage principal and request a recast.
- The lender re-amortizes your loan at the same interest rate, lowering your monthly payment. Lenders charge a modest fee if they allow recasts.
What lenders evaluate
Lenders usually review your full financial picture, including both properties.
- Credit score: many bridge products look for mid-600s to 700s or better, depending on the lender.
- Debt-to-income: expect underwriting to include your current and projected new mortgage payments.
- Combined loan-to-value: total secured debt across properties versus value.
- Reserves: cash to cover several months of two housing payments, which can range from 3 to 12 months depending on the program.
- Documentation: paystubs, W-2s or tax returns, bank statements, title and lien status, and often one or more appraisals.
- Listing status: some bridge lenders require a signed listing agreement for your current home or a clear plan to sell.
Your step-by-step plan
Use this simple checklist to prepare and stay on track.
- Get your numbers
- Estimate your home’s market value and confirm your mortgage balance. A broker price opinion or a pre-list appraisal can help.
- Identify how much you need for the next down payment and closing costs.
- Gather documents
- Recent paystubs, W-2s or tax returns, bank statements, mortgage statements, and title information.
- Talk to lenders
- Ask about bridge loans, HELOCs, and any bridge-to-perm programs. Request timelines, fees, and underwriting criteria.
- Align with your Realtor
- Prepare a strong offer package that shows you can close without a sale contingency. Include a pre-approval that reflects your bridge or HELOC plan.
- Plan your sale
- Decide when to list your current home and prepare it to minimize time on market. Pricing and presentation matter.
Sample timeline
- Days 0 to 7: Pre-qualification, order any required appraisal, apply for bridge or open a HELOC.
- Days 7 to 30: Underwriting and closing of the bridge or HELOC.
- Days 30 to 60: Close on your new home, list your current home if not already on market.
- Days 30 to 180: Sell your current home, repay the bridge or HELOC, and request a recast if it fits your plan.
Build in buffers in case the sale takes longer than expected.
Questions to ask lenders
Use these prompts in your pre-approval meetings.
- Products: Which programs let me buy before I sell? Do you offer a closed bridge, HELOC with purchase draws, or a bridge-to-perm option? Do you require my current home to be listed?
- Pricing and fees: What is the rate and is it fixed or variable? What are all upfront and monthly fees? Are there prepayment penalties?
- Underwriting: What credit score, DTI, reserves, and CLTV do you require? Do you need one or two appraisals?
- Repayment: What triggers repayment and what happens if my home has not sold by term end? Are extensions available and on what terms?
- Operations: How long from application to funding? Who services the loan after closing?
- Recast: Do you allow recasts on the permanent mortgage? What fee and minimum principal are required?
Risks and how to manage them
Buying before you sell works best when you plan for the what-ifs.
- Key risks: carrying two mortgages if the sale is delayed, higher short-term rates and fees, market shifts, and variable-rate increases on a HELOC.
- Mitigations: hold 3 to 12 months of reserves, price and stage your sale realistically, get written disclosures for all fees and triggers, and compare multiple lender quotes.
- Red flags: pressure to sign without full underwriting, vague repayment terms, unusually high upfront fees, no local references, and unclear servicing.
Vetting local lenders in Essex County
Start with referrals from your Maplewood Realtor who regularly closes buy-before-you-sell deals. Speak with local community banks and credit unions about bridge loans, HELOCs, and recast policies. Verify licensing and complaint history through trusted consumer resources. For tax questions, consult current IRS guidance and a tax professional.
Make your Maplewood move easier
You deserve a smooth move and a strong offer on the home you love. If you want to explore bridge loans, HELOCs, or a recast plan tailored to Maplewood, our team can help you run the numbers, coordinate lender conversations, and craft a winning offer strategy. Reach out to the Allison Ziefert Real Estate Group to get started.
FAQs
What is a bridge loan and how does it help me buy first in Maplewood
- A bridge loan is a short-term, interest-only loan that uses your current home’s equity to fund your next purchase so you can make a non-contingent offer and repay the loan after you sell.
Is a HELOC or a bridge loan better when buying before selling
- It depends on your timeline and risk comfort; HELOCs offer flexible draws with variable rates, while bridge loans provide a set lump sum with higher fixed short-term costs.
How long do I have to sell when using a bridge loan
- Many bridge terms run 3 to 12 months, sometimes longer, and some lenders offer extensions; confirm the exact term and extension options before you commit.
Can I lower my new payment after I sell my current home
- Yes, if your lender allows a recast you can apply sale proceeds to principal and re-amortize your mortgage to reduce the monthly payment without changing your rate.
What credit and cash reserves do lenders usually require for buy-before-you-sell
- Many programs look for mid-600s to 700s credit, a reasonable debt-to-income ratio counting both mortgages, and 3 to 12 months of reserves, though exact requirements vary by lender.
