How Bridge Loans Work To Buy Before You Sell

Buying your next Greenwood Village home without selling first can feel like a catch-22. You want to write a clean, non-contingent offer, but your equity is tied up in your current place. If that sounds familiar, a bridge loan could be the tool that unlocks your move. In this guide, you’ll learn exactly how bridge loans work, what they cost, the risks to watch, local Greenwood Village and DTC considerations, and smart alternatives. Let’s dive in.

What a bridge loan is

A bridge loan is short-term financing that lets you buy a new home before selling your current one. It is often used by move-up buyers who need a non-contingent offer to compete, especially in lower-inventory parts of Greenwood Village and the Denver Tech Center.

How it works

• Most lenders secure the bridge loan with a lien on your current home. Some may also take a lien on the new home.
• Many products offer interest-only payments during the term to keep monthly costs lower.
• Terms are commonly 3 to 12 months. Some lenders underwrite for 6 to 12 months with possible extensions.
• Some products are single-close and convert to your long-term mortgage after you sell. Others require a separate permanent mortgage closing.

Typical terms and qualification

• Lenders look at your credit, cash reserves, and equity. Because bridge loans are higher risk, underwriting can be stricter than a standard mortgage.
• Expect lower maximum loan-to-value limits. Many lenders want substantial equity, often in the 30 to 50 percent combined LTV range, though specifics vary by lender.
• You may need to show a listing agreement for your current home or even an accepted sales contract, plus an exit plan for paying off the bridge.
• Underwriting may count both your new mortgage payment and the bridge interest payment. Some lenders model a hypothetical payment on the unsold home. Ask how your lender will calculate qualifying payments.
• An appraisal is typically required on the collateral property and sometimes on the purchase.

Costs and risks to plan for

Bridge loans trade convenience and speed for higher carrying costs and stricter standards. Understanding the full picture helps you decide with confidence.

Common cost components

• Interest rate: usually higher than a standard 30-year mortgage rate and often priced at a premium to prime or conventional rates.
• Origination and lender fees: often a flat fee or a percentage. Many short-term loans fall in the 1 to 3 percent range.
• Closing costs: appraisal, title, recording, and documentation for multiple liens if applicable.
• Carry costs: until you sell, you may pay your existing mortgage, the new mortgage, insurance, taxes, utilities, HOA dues, and bridge interest.

Key risks

• Double carrying cost: if your current home takes longer to sell, you could carry two payments plus bridge interest.
• Market timing: if prices soften, your sale proceeds may be lower than projected.
• Foreclosure risk: default on a secured loan can lead to foreclosure on the collateral property.
• Qualification impact: counting combined payments and reserve requirements can make underwriting tighter for your new mortgage.
• Exit risk: if your home does not sell on the timeline or at the price you assumed, your plan may need to change.

Timeline expectations in Greenwood Village

• Fast sale: list and sell in 2 to 6 weeks. The bridge is in place for less than 3 months and interest is limited.
• Typical: plan for 3 to 6 months. That covers listing, showings, contract, buyer inspections and appraisal, and a 30 to 45 day closing.
• Slow sale: if you pass the term, you may need an extension with fees, a conversion to another product, or a price adjustment to accelerate offers.

Local factors in Greenwood Village and DTC

• Market context: Greenwood Village and DTC attract equity-rich move-up buyers and include many higher-value homes and condos. In low-inventory segments, non-contingent offers often compete better. Always check current days on market and pricing trends before deciding on a bridge strategy.
• Recording and payoff: liens are recorded at the county level. In Arapahoe County, your title company coordinates lien payoff at closing to clear title.
• HOA and condo considerations: many buyers in DTC purchase condos or townhomes. Some lenders have stricter condo underwriting, especially where there are HOA liens, reserve concerns, or investor concentration limits. Verify acceptability of the collateral with your lender.
• Taxes and special districts: Colorado has metro and special districts that affect tax prorations and any assessments at closing. Your title company will itemize these so you can model net proceeds accurately.

Is a bridge loan right for you?

Consider a bridge loan when the following align:

• You have substantial equity and can meet lender LTV and reserve requirements.
• A non-contingent offer significantly increases your odds of winning the home you want in Greenwood Village or DTC.
• You value speed and convenience and have a realistic exit plan. Your home is listed, priced to move, and supported by strong marketing.

You may consider alternatives if:

• Equity is limited or two payments would strain your reserves.
• Local conditions suggest longer market times or softening prices.
• You prefer the lowest possible financing cost and can wait for sale proceeds.

How to use a bridge loan step by step

1. Pre-approval and options review

• Analyze equity, reserves, and your risk tolerance. Compare bridge, HELOC, refinance, or a contingent offer.

2. Choose an experienced bridge lender

• Select a lender that offers local bridge products and obtain preliminary approval. Expect to provide mortgage statements, title info, and a listing agreement.

3. List your current home and start shopping

• Launch a pricing and accelerated marketing plan. Begin your home search in Greenwood Village or DTC at the same time.

4. Write a non-contingent offer

• Use your bridge approval to present a stronger offer. Coordinate with your lender on timing.

5. Close on the new home

• The lender records the bridge lien on your existing home or both properties depending on the structure. Confirm insurance and reserves.

6. Sell your current home

• At closing, title pays off the bridge loan from proceeds and clears the lien. Any fees due are settled at payoff.

7. If sale timing slips

• Discuss an extension, a conversion or refinance, or adjust your listing strategy to accelerate the sale.

What your lender will ask for

• Recent mortgage statements and estimated payoff amounts
• Property tax statements and a current title report
• Listing agreement and marketing plan for your current home
• Purchase contract for the new home once accepted
• Appraisals for the collateral property and possibly the purchase
• Proof of homeowner’s insurance on collateral property
• Proof of reserves, bank statements, W-2s, pay stubs, and tax returns

Smart questions to ask lenders

• What bridge products do you offer and what are the term, rate type, and interest-only options?
• How do you calculate qualifying payments for the new mortgage and the bridge loan?
• What are your LTV and combined LTV limits?
• What origination fees, closing costs, and extension fees apply?
• What timeline do you require and how are extensions handled?
• What documentation of my exit strategy is required?
• Will you place a lien on my current home, the new home, or both?
• Do you offer single-close options that convert to permanent financing?
• How will payoff be coordinated with the title company at sale closing?

Alternatives to bridge loans

A bridge is not the only path to buying before you sell. Compare these options side by side.

HELOC on your current home

• Pros: typically lower rates than a bridge, flexible draws, and often interest-only early on.
• Cons: variable rates and lender LTV limits apply.
• Best when: you have strong equity and want a lower-cost, flexible interim loan.

Home equity loan (second mortgage)

• Pros: fixed rate and predictable payments.
• Cons: adds a second payment and uses equity that could affect flexibility.
• Best when: you prefer fixed payments and can support the added obligation.

Cash-out refinance

• Pros: can be cheaper than a bridge and consolidates into one loan.
• Cons: resets your mortgage term, adds time to the process, and may carry closing costs.
• Best when: you can wait for a refinance timeline and want lower financing cost.

Contingent offer

• Pros: simple structure and avoids double payments.
• Cons: less competitive in seller-favored segments of Greenwood Village and DTC.
• Best when: reserves are tight or the target submarket is not highly competitive.

Rent-back or leaseback after closing

• Pros: sell first, then lease your home back from the buyer while you shop.
• Cons: requires a buyer willing to agree and clear lease terms.
• Best when: a strong buyer is flexible and you need extra time.

Single-close bridge from the purchase lender

• Pros: closes once and converts to the permanent loan after your sale.
• Cons: not all lenders offer this and terms vary.
• Best when: you want a streamlined path and can find a lender with this product.

Tips to speed your sale

A fast, clean sale reduces your bridge timeline and carrying costs.

• Price with intent: aim for early showings and strong first-week activity.
• Elevate presentation: staging, professional photography, and targeted marketing shorten days on market.
• Prepare early: disclosures and repair lists ready before listing reduce buyer delays.
• Coordinate tightly: keep your lender and title team aligned on payoff timing.

Next steps

If you want to buy in Greenwood Village or the DTC without a sale contingency, a bridge loan can be a smart tool when matched to a realistic timeline and strong exit strategy. Compare costs and alternatives, review lender terms carefully, and coordinate with a trusted local advisor, lender, and tax professional to align the plan with your budget and goals.

Ready to map out a clear path to your next home and discuss whether a bridge, HELOC, or another option fits best? Connect with Kelly Mauro for a personalized consultation and plan.

FAQs

What does a bridge loan cover when buying before selling?

• It provides short-term funds so you can purchase a new home before your current one sells, usually secured by your existing property and repaid from sale proceeds.

How long do bridge loans last in Greenwood Village?

• Most terms range from 3 to 12 months. Many lenders underwrite for about 6 months, with possible extensions that can add fees.

Are bridge loans more expensive than regular mortgages?

• Generally yes. Expect a higher interest rate than standard 30-year loans, plus origination fees, closing costs, and potential double carrying costs until you sell.

Will a bridge loan make it harder to qualify for my new mortgage?

• It can. Some lenders count both the new mortgage and the bridge payment when qualifying you, and many require higher cash reserves.

What if my current home does not sell before the bridge term ends?

• Options include asking for an extension, converting to another product like a HELOC or refinance, or adjusting your price and marketing to accelerate the sale.

Can I use a bridge loan for a condo or townhome in DTC?

• Often yes, but condo underwriting can be stricter. Lenders review HOA financials, any liens, and occupancy mix, so verify acceptability early.