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Bridge loan cost example
Below is an example of how much a $300,000 bridge loan might cost, along with possible fees.
You find a home you’d like to purchase, but you’re still waiting for your current Massachusetts house to sell. The new home’s asking price is $520,000. You can only come up with $220,000, but you have at least another $300,000 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 | $300,000 | $300,000 |
| Interest (varies) | 10% (example for 6 months) | $15,000 |
| Origination fee | 1.5% | $4,500 |
| Underwriting fee | $1,000 | $1,000 |
| Appraisal fee | $700 | $700 |
| Closing cost* | 2% | $6,000 |
| Total repayable amount | $327,200 |
*Expect to pay 2% to 5% in closing costs
Who provides bridge loans in Massachusetts?
In Massachusetts, securing a bridge loan requires a bit of research due to its specialized nature and detailed underwriting. Not every financial institution offers them, and the terms can vary significantly. To streamline your search, consider reaching out to the following types of lenders known for providing bridge loans:
- Your current mortgage lender: Start the conversation with your current mortgage lender. They already have a history with you and might be willing to offer favorable terms for a bridge loan.
- Local banks: These institutions often have a vested interest in supporting community members. They may provide more personalized service and be more flexible with loan terms.
- Credit unions: As member-focused organizations, credit unions can be a good source for a bridge loan. Their rates can be competitive since they’re not-for-profit entities.
- Hard-money lenders: If you need a bridge loan quickly and have substantial equity, these hard-money lending companies can be a solution. However, be prepared for higher interest rates and fees.
- Non-QM lenders: These lenders specialize in loans that don’t meet the strict criteria of conventional mortgages, which might make them more open to offering bridge loans.
Moreover, some innovative real estate companies in Massachusetts are set up to streamline the process of acquiring a bridge loan, offering integrated services that can ease the transition from selling to buying your next home. Learn how this option works in the section below.
Are there alternatives to bridge loans in Massachusetts?
While a bridge loan might not work for every Massachusetts homeowner’s unique situation, there are alternatives to consider:
Home equity loan: This kind of loan, sometimes called an HEL, allows you to borrow money using the equity in your home as collateral. Interest rates for a home equity loan can be more expensive than the current rate on your first mortgage, but instead of completing a cash-out refinance (paying off the first mortgage and borrowing cash), you can just borrow the money you need at the higher interest rate and leave your first mortgage at its lower rate.
Home equity line of credit (HELOC): Another option to use your existing equity is a HELOC. This allows you to pull money out of your property for a relatively low interest rate.
Instead of receiving the money all at once, your lender will extend a line of credit for you to borrow against. You might, however, have to pay an early closure fee if you open this line of credit and close it very soon after. Unlike a home equity loan, HELOCs typically have adjustable interest rates.
