Alternatives to bridge loans can include home equity loans and home equity lines of credit, which can both be used like a bridge loan when transitioning from one living situation to another or while waiting for alternate funding to become available. Bridge loans have fast approval times and fast repayment terms with a typical bridge loan lasting for around six months to a year, but they might not always be an option. Alternatives to bridge loans are available to those with something to secure additional credit.
Home equity loans allow seniors to borrow money against their homes. When homeowners have no mortgage or a mortgage that is substantially below the value of the property, they can often borrow cash using the home as security for the loan. A home equity loan may take a similar amount of time to close as a standard mortgage, and the cash value of a home equity loan may be limited to a percentage of the total property value.
For seniors seeking to buy into an independent or assisted living community by using the sale of their home to fund the transition, home equity loans are one way to generate capital while collecting offers on a home. Fixed interest rates make these an attractive option for seniors who haven’t finalized a decision about what to do with their homes after moving. The Federal Trade Commission offers information about these loans and how to find the best options.
When a bridge loan isn’t available, a home equity line of credit, or HELOC, is an option that can help improve cash flow for closing costs and a down payment on a retirement property. Similar to home equity loans, the value of a senior’s home determines the maximum line of credit available.
HELOCs work very much like credit cards in that there is no fixed term and the interest is variable. HELOCs have a fixed time period in which you can use the credit line; after this period, you must start making payments. In some cases, the entire amount is due, while others allow for a payment plan. No matter how the line of credit is structured, if you sell the property, the HELOC is often deducted directly from the sale proceeds.
One of the most direct ways to avoid using a bridge loan is with a property sale. Instead of financing a move in advance of a planned sale, seniors can list their homes before they move. With reasonable sale price expectations and a home in good condition, it’s often possible to arrange for a sale that includes a rent-back period to give seniors time to move out after the closing date.