Bridge Loans in California: Buy Before You Sell

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Buy-before-you-sell financing is a big part of my Marin and Bay Area practice. Call (800) 239-1103.

A bridge loan is short-term financing, usually 6 to 12 months, that lets you use the equity in the home you own to buy your next home before the first one sells. You make a non-contingent offer, close on the new home, then sell the old one and pay the bridge off from the proceeds.

In Marin, San Francisco and much of coastal California, an offer that depends on selling your current home often loses to a clean one. The equity is there — it’s just locked in the house you live in. A bridge loan, a bridge HELOC or a cross-collateral loan unlocks it for a few months. I compare all three, plus the new-home mortgage, so the whole move is planned as one transaction.

How a Buy-Before-You-Sell Bridge Works

1. Get approved first. The lender reviews your current home’s value, your existing mortgage and your income, and approves the bridge and the new mortgage before you shop.
2. Make a non-contingent offer. Bridge funds cover the down payment (and sometimes more), so your offer doesn’t depend on selling.
3. Close and move. You close on the new home and move once.
4. Prepare, list and sell the old home on your timeline instead of under deadline pressure.
5. Pay off the bridge from the sale proceeds at closing. The rest of your equity is yours.

How Much You Can Bridge

Most bridge lenders lend up to roughly 70–80% of your current home’s value, minus what you still owe on it.

Example: a Marin home worth $1,800,000 with a $400,000 mortgage. At 75%: $1,800,000 × 0.75 = $1,350,000, minus $400,000 = $950,000 available as a down payment on the next home — without selling first.

The new-home lender will also qualify you for your new mortgage. Expect most lenders to count the payments on both homes (plus bridge interest, if any) when they calculate your debt-to-income ratio, although bridge programs that defer payments or roll interest into the loan can reduce the monthly burden.

Three Ways to Bridge

	Bridge HELOC	Bridge loan (second on departing home)	Cross-collateral loan
Secured by	Current home	Current home	Both homes
How funds work	Line of credit; interest only on what you draw	Lump sum at closing	One loan funds much or all of the purchase
Cash needed	Closing costs; down payment comes from the line	Closing costs; down payment comes from the bridge	Sometimes little or none
Payments	Usually interest-only	Usually interest-only, sometimes deferred	Interest-only or deferred until the sale
Watch out for	Must be opened before you list; most lenders won’t open a HELOC on a listed home	Higher rate and fees than a HELOC	Fewer lenders; both homes are at risk until the old one sells
Best for	Planners with time, good income and credit	Buyers who’ve already listed or need speed	High-equity owners who want minimal cash at closing

Bridge HELOC

A HELOC on your current home can work as a bridge if you open it before the home goes on the market — lenders generally won’t open a new line on a listed property, and some freeze lines once a home is listed. Rates are usually lower than a stand-alone bridge loan, and you pay interest only on what you draw. Some bridge HELOC programs I use are built specifically for move-up buyers and can fund quickly; limits depend on your equity and credit. See HELOCs in California.

Example: you own a San Rafael home worth $1,200,000 with a $500,000 mortgage ($700,000 of equity) and want a $1,600,000 Tiburon home with 25% down ($400,000). You open a $400,000 bridge HELOC before listing, make a clean offer on Tiburon, then list San Rafael and repay the line from the sale. You pay interest only on the $400,000 drawn, only until San Rafael closes.

Cross-collateralization

With a cross-collateral loan, the lender takes a lien on both your current and new homes, so your existing equity serves as the down payment and little or no cash may be needed at closing. After the old home sells, the bridge is paid down or off, the lien on the old home is released, and you’re left with a normal mortgage on the new one (or refinance into one). Lenders usually want a comfortable combined loan-to-value across both homes, good credit and a marketable departing home.

What It Costs

Bridge financing costs more than a regular mortgage — that’s the price of timing certainty. Bank and credit-union bridge programs for strong borrowers price lower; private bridge lenders price higher. Expect origination points plus appraisal, title and lender fees in addition to interest.

Example: a $500,000 bridge at 10% for 90 days is about $12,500 of interest ($500,000 × 10% ÷ 12 × 3). Add 2 points ($10,000) and a couple thousand in fees, and the bridge costs roughly $24,000–$25,000. At 9.5% for six months, interest alone is $23,750.

Compare that with the real alternatives: losing the home to a non-contingent buyer, paying more to get a contingent offer accepted, or selling first, renting and moving twice. Selling without time pressure also lets you prepare and price the old home properly.

Requirements

• Equity in the departing home, with the bridge generally keeping total debt within about 70–80% of its value.
• Credit — many lenders want roughly 680 or higher for the best terms; bridge HELOC programs may go lower.
• Ability to carry both homes for a while. Owner-occupied bridge loans are consumer loans: federal rules exempt temporary bridge loans of 12 months or less from the full ability-to-repay rule, but most lenders still verify income, and the new-home mortgage is fully underwritten.
• A marketable departing home and a realistic listing plan.

If the old home doesn’t sell in time: many bridge loans can be extended for a fee. Price it realistically from day one, and ask about extension terms before you sign. A reduced price is usually cheaper than months of extra bridge interest.

Bridge Loans for Investors

Investors use bridge financing differently — for speed and timing rather than a move:

• Equity release: borrow against a rental you own to fund the down payment on the next acquisition without selling. Example: a $700,000 rental with a $250,000 mortgage at 70% LTV supports $490,000 of debt, leaving about $240,000 for the next deal.
• Value-add: buy a property that’s under-occupied or under-rented, stabilize it, then refinance into a DSCR, agency or commercial loan. See commercial loans.
• BRRRR: acquire, renovate, rent and refinance. If the project needs heavy renovation with draws, a fix-and-flip or hard money loan is usually the better structure.

Investor bridge loans are business-purpose loans and are underwritten mainly on the property, your equity and the exit.

Bridge Loan vs. Hard Money

The terms overlap. “Bridge” describes the purpose — short-term money between two events. “Hard money” describes the source — private, asset-based lending. A homeowner’s bridge from a bank or HELOC lender with full documentation is priced much closer to a regular mortgage than a private hard money loan. An investor bridge from a private lender is effectively hard money without the renovation draws.

Where I See Bridge Loans Most

• Marin County: Tiburon, Belvedere, Ross, Kentfield, Mill Valley, Sausalito, Larkspur, Corte Madera, San Rafael and Novato. See Marin mortgages.
• San Francisco: Pacific Heights, Noe Valley, Cole Valley, the Marina and Sea Cliff, and SF owners moving to Marin. See San Francisco mortgages.
• East Bay and Peninsula: Piedmont, Orinda, Lafayette, Moraga, Danville, Los Altos and Palo Alto.
• Southern California: Los Angeles (Pasadena, Glendale, Santa Monica, Brentwood), Orange County and San Diego.

Many of these purchases are jumbo loans, so the new mortgage matters as much as the bridge. See jumbo loans.

Frequently Asked Questions

How much does a bridge loan cost in California?

Bridge financing costs more than a regular mortgage: a higher rate, usually interest-only, plus origination points and fees. As an example, a $500,000 bridge at 10% for 90 days costs about $12,500 in interest; with 2 points and fees the total is roughly $24,000–$25,000. A bridge HELOC opened before listing is often cheaper.

How much can I borrow with a bridge loan?

Most bridge lenders go up to roughly 70–80% of your current home’s value minus your existing mortgage. On a $1,800,000 home with a $400,000 balance, 75% of value is $1,350,000, leaving about $950,000 available for your next down payment.

Is a bridge loan the same as a HELOC?

No, but a HELOC can do the same job. A bridge loan is a short-term loan built for buying before selling, and it can be arranged even after your home is listed. A HELOC is a revolving line that is usually cheaper but generally must be opened before the home is listed, because most lenders won’t open a line on a property that’s for sale.

What is a cross-collateral bridge loan?

It’s a loan secured by both your current home and the home you’re buying. Your existing equity acts as the down payment, so you may need little or no cash at closing. When the old home sells, the bridge is paid down and that lien is released, leaving a regular mortgage on the new home.

What if my home doesn’t sell before the bridge loan is due?

Many bridge loans can be extended for a fee, so ask about extension terms before you sign. The best protection is pricing the departing home realistically from the start — a price reduction usually costs less than months of additional bridge interest.

Can investors use bridge loans?

Yes. Investors use bridge loans to pull equity from a property they own for the next purchase, to buy under-occupied or under-rented properties and refinance once stabilized, and to close quickly. Heavy renovation projects are usually better suited to a fix-and-flip or hard money loan with rehab draws.

Related Resources

• HELOCs in California
• Jumbo Loans
• Marin County Mortgages
• San Francisco Mortgages
• Hard Money Loans
• HELOC vs. Cash-Out Refinance
• Commercial Real Estate Loans

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