Selling while buying another (bridge financing)

Selling and buying simultaneously is one of the most complex real estate transactions. The core challenge is timing: you need proceeds from your current home to buy the next one, but you may need to close on the new home before your current one sells.

42 steps across 12 sections

1. How It Works

  • Short-term loan (typically 6-12 months) that uses your current home's equity as collateral
  • Provides funds for the down payment and/or purchase of the new home before the old one sells
  • Repaid when the current home sells

2. Terms and Costs

  • Interest rates: Higher than standard mortgages, typically 8-10% in 2026
  • Loan term: 3-12 months (Rocket Mortgage offers up to 6 months)
  • Loan amount: Usually up to 80% of current home's equity
  • Origination fees: 1.5-3% of the loan amount
  • Closing costs: Similar to a standard mortgage

3. Pros

  • Make a non-contingent offer on the new home (much stronger in competitive markets)
  • Avoid moving twice or temporary housing
  • Fast approval process (days, not weeks)
  • Access equity without selling first

4. Cons

  • Higher interest rates than conventional mortgages
  • Risk of carrying two mortgages plus the bridge loan if current home does not sell quickly
  • Additional closing costs and fees
  • Pressure to sell current home quickly or accept a lower price
  • If the home does not sell within the loan term, the full balance is still owed

5. How It Works

  • Open a HELOC on your current home before listing it
  • Use the HELOC funds for the down payment on the new home
  • Pay off the HELOC when the current home sells

6. Advantages Over Bridge Loan

  • Lower interest rates (currently ~7% variable vs. 8-10% for bridge loans)
  • More flexible repayment (interest-only during draw period)
  • Can be opened in advance and drawn on when needed
  • Lower origination costs

7. Disadvantages

  • Must qualify based on income and credit with both the existing mortgage and the HELOC
  • Variable rate means payments can increase
  • Must be opened before listing (lenders may not approve a HELOC on a home being sold)
  • Draw period may be limited

8. How It Works

  • Include a clause in your purchase offer that the deal is contingent on selling your current home
  • Protects you from owning two homes, but weakens your offer

9. Terms

  • Typically gives you 30-60 days to sell your current home
  • Seller may include a "kick-out clause" allowing them to accept other offers with a 72-hour notice to you
  • In competitive markets, sellers often reject contingent offers

10. Best For

  • Buyer's markets where sellers have fewer options
  • Situations where timing is flexible
  • When you cannot qualify for bridge financing

11. How It Works

  • Sell your current home first but negotiate to remain in it (as a renter) for 30-60 days after closing
  • Use the sale proceeds to close on the new home during the rent-back period

12. Terms

  • Rent-back period: Typically 30-60 days (some lenders limit to 60 days for the buyer's financing)
  • Rent: Usually set at the buyer's daily mortgage cost (PITI)
  • Security deposit: Often equal to 1-2 months' rent
  • Must be formalized in writing as part of the sale contract

Sources

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