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Bridge loan cost example
Below is an example of how much a $200,000 bridge loan might cost, along with possible fees.
Let’s say you find a home you’d like to purchase, but you’re still waiting for your current Illinois house to sell. The new home’s asking price is $320,000. You can only come up with $120,000, but you have at least another $200,000 worth of equity in your current property. You want to access that money to cover the shortfall before your new home is sold to another buyer.
| Net loan amount | $200,000 | $200,000 |
| Interest (varies) | 10% (example for 6 months) | $10,000 |
| Origination fee | 1.5% | $3,000 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $500 | $500 |
| Closing cost* | 2.1% | $4,200 |
| Total repayable amount | $218,700 |
*These closing costs typically range between 1.5% and 3%
Who provides bridge loans in Texas?
Daunt believes that many people don’t even know that bridge loans are available or that they don’t understand them and can’t find a professional who offers them. If you’re looking for a bridge loan in Texas, here are some places to start your search:
- Local banks
- Credit unions
- Hard-money lenders (private lenders)
- Non-qualified mortgage (non-QM) lenders
There are also modern real estate companies that grant a bridge loan to help you fill the gap between buying and selling a home. We’ll share how this works later in this post.
Are there alternatives to bridge loans in Texas?
If a bridge loan isn’t right for you, there are some alternatives to consider:
Home equity loan: A home equity loan allows you to use the existing equity in your current home as collateral. This type of loan creates a lien against the property and reduces the homeowner’s equity in the house. Interest rates may be higher than the rate on the first mortgage.
An advantage, however, is that instead of opting for a cash-out refinance, which would mean possibly paying a higher interest rate on the entire borrowed amount, you can keep the bulk of your loan at your current rate.
For example, let’s say you have a $300,000 mortgage at 3% interest on a home that’s worth more than $450,000. You can take out a $100,000 home equity loan at 6% to 7% and keep your first mortgage at 3%.
“Let’s say you see the deal of the century [on the home you want]. If you have a home equity loan with $100,000 available and don’t have any funds drawn, you could write a check right then,” Keeton notes.
Home equity line of credit (HELOC): Like a home equity loan, a HELOC leverages the equity in your home, but instead of receiving a lump sum payment, you’ll gain a line of credit against which you can borrow as needed. Generally, the interest rate is lower than a home equity loan’s rate.
