What is a residential bridge loan?
A residential bridge loan is a short-term loan used by an individual or a company in real estate transactions to secure a second property prior to the sale of the first property, which creates a ‘bridge.’ This type of loan helps borrowers purchase their new home or property and use the equity on their first property to secure the loan while waiting for that property to sell. Other names for residential bridge loans include interim financing, swing loans, and gap financing.
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What are the different types of residential bridge loans?
- Conventional loans
- Jumbo loans
- Government-insured mortgages
- Fixed-rate mortgages
- Adjustable-rate mortgages
When you’re purchasing a property, you will typically need to work with a lender to secure financing, as the purchase is quite large. However, not all buyers come to the table with the same financial history or background, so flexible loan options are often important in the process. If you’re looking for a more flexible short-term loan, you may want to consider a residential bridge loan.
The process of buying and selling a home can become overwhelming quickly. This overwhelming feeling is even more intense when you’re trying to do both of these simultaneously. Luckily, you have options. At Titan Funding, we offer you competitive rates, a quick mortgage process, and personalized lending to fit your budget and lifestyle. We provide you with options to consider when you need a little financial assistance. If you need a short-term, more flexible loan option, you may want to consider a residential bridge loan.
When should you use a residential bridge loan?
The best situation for applying for a bridge loan is if you need quick access to funding to pay for a second property before your first property sells. A bridge loan is also helpful for contractors who need funds quickly to secure a property. You can consider this type of loan if you meet the following criteria:
- Sellers in your area don’t accept offers based upon contingencies.
- You expect you’ll be selling your home in the next few months and are ready to purchase your next property now.
- You can’t afford the required down payment without the equity in your current home.
- You qualify for the bridge loan based on creditworthiness and equity.
There are also several circumstances when obtaining a bridge loan may not be worth it. These include when:
- You’re unsure of when you’ll be able to sell your current home.
- You can make a sufficient down payment without a bridge loan.
- You’re unsure of whether you’ll be able to afford two mortgages simultaneously.
- You’re in an area where you can secure financing.
What are the advantages of a residential bridge loan?
Like everything in life, there are both pros and cons regarding securing financing for a residential bridge loan. The advantages of residential bridge loans include available equity, no second payments, fast financing, flexibility for purchasing, and no contingencies.
- Available equity. You can immediately use the equity in your current house to buy a new home.
- No second payments. You may not be required to make payments on your bridge loan immediately, allowing you to pay whenever you have enough cash flow to do so. This option is not always the case, however.
- Quick financing. Financing can be closed on a bridge loan faster than other types of funding.
- Flexibility for Purchasing. If you find a house you love, a bridge loan gives you the ability to close on a new home before your current home is sold.
- No contingencies. You can remove contingencies from your offer to buy your new home. The ability to remove contingencies may be favorable to sellers since your offer to purchase their home isn’t contingent upon your current home selling.
What are the disadvantages of a residential bridge loan?
The disadvantages of residential bridge loans include higher interest rates, equity requirements, strong credit requirements, and double mortgage payments:
- Higher Interest Rates. The rate increase is because lenders have less time to collect interest due to short loan term.
- Equity requirement. Since a bridge loan uses equity from your current home as collateral, you must have a certain amount of equity to qualify, for example, 20%.
- Credit requirements. You must typically have stable finances and strong credit history to qualify for a bridge loan. If your credit is shaky, you may not qualify.
- Double mortgage payments. If your home doesn’t sell by the time you have to begin paying your bridge loan, you’ll be responsible for paying for a second mortgage.
What are some alternatives to residential bridge loans?
A residential bridge loan can be highly beneficial when used in the right scenario and for the right person. Other types of funding may benefit you as well.
Possible alternatives to residential bridge loans include a home equity line of credit (HELOC), a personal loan, or no loan at all.
- A HELOC, or home equity line of credit, which allows you to borrow against the equity you have in your current home. Consider this loan to be like a credit card. You may be approved for a certain amount but will only pay interest on the amount that you’re using at a given time. This loan may come with a lower interest rate than a bridge loan, but you’ll be required to take out a home equity line of credit before you put your house on the market. Some lenders won’t approve once your home is for sale.
- A personal loan may also allow you to obtain a sufficient down payment to get your new home. You’ll be approved for a specified amount of money with a fixed interest rate and a fixed term. This type of loan gives you a certain amount of time to repay the loan.
- This next option may sound unappealing, but you can also opt for no loan. You can wait until your current home sells to purchase a new home.
Who is eligible for a residential bridge loan?
Not everyone is eligible for a bridge loan. The process for a bridge loan is slightly different than other types of credit. To obtain financing, you’ll find yourself subjected to credit checks and need an acceptable credit score. You’ll also need a sufficient amount of equity in your current home. Lenders, such as Titan Funding, will also verify debt-to-income ratios, loan-to-value, and your credit history.
Reach Out to Titan Funding Today
If you need a residential bridge loan or any other type of funding, reach out to Titan Funding today. Our expert team will be glad to help you through the lending process and answer any questions you may have. You can reach out to our customer support team at 855-910-6434 today. Feel free to send us an online inquiry as well, and a member of the Titan Funding team will get back to you promptly.
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Frequently Asked Questions - FAQ
TL;DR: A residential bridge loan from Titan Funding provides short‑term financing to purchase a new home before selling the current property. These loans use the equity in the existing home as collateral and offer flexibility when sellers won’t accept contingent offers.
What is private money lending?
Private money lending refers to financing provided by individuals or non‑bank entities for real‑estate investments. These loans are asset‑based rather than credit‑based and usually have short terms with higher interest rates compared with traditional bank loans.
How do I qualify for a real‑estate investment loan through Titan Funding?
Titan Funding evaluates the property’s value and the loan‑to‑value ratio rather than focusing on credit scores. Maintaining an LTV around 60 % and providing a clear plan for the investment increases your chances of approval.
What documents are needed for hard‑money loans?
Documentation typically includes proof of property ownership or purchase contracts, appraisals, and, for construction loans, detailed plans and budgets. Because underwriting is asset‑based, credit documentation is less critical than in conventional lending.
How quickly can I get funded for a property in Florida?
Titan Funding’s underwriting process usually takes about 48 hours, and approved borrowers can receive funds within four days for hard‑money, rental or bridge loans. Some commercial bridge loans provide funding in as little as 10 days.
Does Titan Funding lend to foreign nationals?
Yes. Titan Funding offers hard‑money programs for non‑U.S. citizens seeking to buy or refinance property in South Florida, using asset‑based underwriting to bypass conventional loan barriers.
What types of loans does Titan Funding offer?
The company provides various short‑ and long‑term real‑estate loans, including hard‑money and bridge loans, residential and commercial bridge loans, multifamily financing, fix‑and‑flip loans, rental property loans, ground‑up construction loans, bridge‑to‑permanent loans and cash‑out refinance options.
How does LTV work in real‑estate loans?
Loan‑to‑value ratio is calculated by dividing the loan amount by the appraised value of the property. Lenders, including Titan Funding, set maximum LTV thresholds (often around 60 % for hard‑money loans) to manage risk.
Which states does Titan Funding serve?
Titan Funding primarily serves Florida but may authorize loans in other states on a case‑by‑case basis. Applicants can discuss their specific property and location with the company’s professionals.
How do I calculate return on investment (ROI) for fix‑and‑flip projects?
ROI is determined by subtracting total costs (purchase price, renovation expenses, loan interest and fees) from the final sale price, then dividing the result by total costs. Titan Funding’s guide on calculating fix‑and‑flip ROI emphasizes factoring in loan terms and interest to evaluate profitability.
What are the risks of hard‑money loans?
Hard‑money loans carry higher interest rates (often 10 %–15 %) and points compared with traditional financing. They are short term, so borrowers need a clear exit strategy and must account for appraisal and origination fees in their budgets.
What is a residential bridge loan?
A residential bridge loan is a short‑term loan that allows individuals or real‑estate companies to secure a second property before selling their first property. The existing home’s equity serves as collateral to bridge the gap between buying and selling.
What types of residential bridge loans does Titan Funding offer?
Titan Funding considers various mortgage types when structuring a bridge loan, including conventional, jumbo, government‑insured, fixed‑rate and adjustable‑rate loans. After reviewing the borrower’s credit and income, the team determines which loan option fits the buyer’s needs.
When should borrowers use a residential bridge loan?
A bridge loan is useful when sellers do not accept contingent offers, when borrowers expect to sell their existing home soon but need to purchase a new home immediately, or when they require equity from the current home for a down payment. It is also suitable for contractors needing quick funds to secure a property.
What are the advantages of residential bridge loans?
Advantages include access to available equity, no immediate second mortgage payments, fast financing, flexibility to purchase quickly and the ability to remove contingencies from purchase offers. These features allow buyers to compete more effectively in competitive markets.
What are the disadvantages and requirements of bridge loans?
Bridge loans typically carry higher interest rates, require sufficient equity (often 20 %) and may involve credit and debt‑to‑income requirements. Borrowers might face double mortgage payments if their home doesn’t sell before repayment begins.
Are there alternatives to residential bridge loans?
Alternatives include home‑equity lines of credit (HELOCs), personal loans or waiting to purchase until the current home sells. A HELOC may offer a lower interest rate but requires securing the line before listing the home for sale.