Residential Bridge Loans in Denver

If you found a home to buy and have all cash or can qualify to afford two mortgage payments you can make a seamless transition into your new home in Colorado. Otherwise, a bridge loan or short-term loan can be the ideal solution to pull out the equity in your current property.

What is a Bridge Loan?

Bridge loans are short-term mortgage loans that provide you with the down payment or necessary funds to buy another home before you sell your current home in Colorado.

The timing of completing the sale of your existing home and buying another oftentimes can be a problem since you are unable to control the buyer's financing of your home. The sale of your current home may fall through or be delayed no matter how qualified your buyer is.

When your qualified buyer's purchase of your home falls through it can cause you to lose out on the perfect home you're under contract to buy. With most homes for sale in Denver, Colorado Springs, and Fort Collins receiving offers from multiple buyers you want to put in the best offer you can, whether it's a large down payment or an all-cash offer.

"A bridge loan is considered a very effective method to buy a new home before selling your present home."

How Does a Bridge Loan Work?

There are two ways a bridge loan can be arranged. The first method is to use it to refinance up to seventy percent of your home's value (70 LTV) and payoff your first mortgage and then use the excess proceeds towards the new home. These proceeds help faciliate the purchase of the new home with a large down payment. Here's a couple examples below.

    Method #1
  • Existing home's value: $700,000
  • Current mortgage balance: $180,000
  • Bridge loan: $490,000 ($700K * .70)
  • You get $310,000 ($490,000 - $180,000 mortgage)

You can now use the $310,000 towards the down payment on a new home and pay back the $490,000 bridge loan in 12 months.

  • Existing home's value: $3,500,000
  • Current mortgage balance: $1,000,000
  • Bridge loan: $2,100,000 ($3.5 mil * .60)
  • You get $2.1 million - closing costs.

You can now use the $2.1 million towards the down payment on another primary home and repay the bridge loan once your home sells or you must refinance in 12 months, whichever comes first.

Benefit Alert. Some bridge loans we offer allow you to:
1.) make the monthly payment as interest only
2.) have 12 payments collected at closing
3.) make no payment until your home is sold.

These three options depend on the value of your home and which bridge loan product in the table below you are best qualified for.

The second method relies on the value of two Colorado homes you own. Instead of using only the value of your existing home, you are provided a bridge loan that covers two residential properties you own. The new bridge loan will be cross-collateralized onto both properties.

    Method #2
  • Your home's value: $2,000,000
  • Your rental home's value: $750,000
  • Combined mortgage balances: $800,000
  • Bridge loan: $1,650,000 ($2.75 mil * .60)
  • You get $1.65 million - $800k = $850,000

Once your $2 million home is sold, you pay off the $1.65 million bridge loan or refinance out of the bridge loan before 12 months is up.

NOTE: If you want a bridge loan to be cross-collateralized the bridge loan must be $1,000,000 or more. This means your home's value must be $1,666,000 or higher because the maximum loan to value limit offered by a residential bridge lender is 60.

Why get a bridge loan?
1. Your all-cash offer beats out competing buyer's offers with financing contingencies.
2. If you're not making an all-cash offer then your larger down payment is more attractive to the seller than a buyer with a 10-or 15-percent down payment.
3. Your debt to income ratios may exceed the guidelines of traditional banks but with two bridge loan lender programs below it's not a denial reason.

Minimum Loan Amount for Bridge Loans

For investment properties: $250,000 (subject to change)

For primary residences: $200,000 (subject to change)

Maximum loan to value: 70; (60 LTV for loans over $2 million)

Maximum loan to value: $5 million (60 LTV)

    Advantages
  • If your income is low or you have high debt-to-income ratios (DTI), you can still be approved since it's based on your home's value
  • less documentation to qualify

    Drawbacks
  • higher borrowing costs
  • higher interest rates

 

Primary Home Bridge Loans Available

Bridge Loan Programs Loan Amounts LTV Interest Rate Fees DTI Loan on New Home
805BCSE $200K to $3 million up to 60 LTV 7.75 2 Points Yes, 45 max Yes
858LSSD $200K to $3 million up to 75 LTV 8.75 3 Points N/A Yes
858SDAX $1 million to $7 million up to 60 LTV 9.75 2 Points N/A No
307WMNT $100K to $500K up to 85 LTV 6.75 $2,000 Yes, 45 max Yes
If "loan on new home" is marked "yes" it means the bridge lender must also do the mortgage loan on the new property at market rates.
DTI: debt to income ratios may be calculated. If N/A then DTI is not calculated
LTV: loan to value maximums

Bridge loans are structured and agreed upon to be paid off within 6 to 12 months. If you do not repay the bridge loan after one year there are no extensions. The lender may start the foreclosure process. If you believe your area has slow sales it may be wise to look into some less costly and more stable alternatives.

Investment Property Bridge Loans

We have more rental property bridge loans than owner-occupied financing on duplexes thru quadplexes, multifamily 5 or more units, mixed-use residential and commercial. Simply inquire for a custom quote.

Alternatives to a Bridge Loan

Cash Out Conventional Refinance

This approach may be the closest option than to get an actual bridge loan. The best way to make it work is:

  • If your home isn't going to be sold quickly, refinance with a lender before you list it with a real estate agent.
  • Apply for a loan with the lowest interest rate

The loan amount requested needs to take some cash out for the down payment on the next home and cover 3-6 months of mortgage payments. Your income will also have to qualify to use a cash-out refinance. The advantage of a cash out-refinance vs. a bridge loan is it's lower cost.

Home Equity Loan

A large majority of lenders will not approve a loan for home that is listed for sale. This is especially true for a home equity loan or line of credit. If it is for sale or was recently, that fact alone will almost certainly be noted on the appraisal.

Lenders offer home equity loans and lines of credit to have terms of 10 to 20 years, not six to twelve months. Nevertheless, before listing your home for sale you may want to pull out some of your home equity for the down payment.

You will need to qualify for the new home equity payment in the debt to income ratio (DTI) calculation by the underwriter. Keep in mind that your qualifying income must be able to support your existing mortgage, the home equity loan, and the mortgage on the next home your buying which makes it very challenging.

With a bridge loan, the qualifying income and high DTI is not a factor. This is where the bridge loan's advantage really shines.

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