An alternative bridge loan strengthens buyer’s offer

“Typically, bridge loans come with a fee to the lender of well over 2% of the loan amount. I told them that although ProMortgage does work with bridge loan lenders, I recommended that we go with one of our other lenders who offers an ‘alternative bridge l

Mortgage broker: Liz Bayer, ProMortgage.

Property type: Condo in Cow Hollow.

Appraised value: $1.5 million.

Loan amount: $700,000.

Loan type: 7-year ARM.

Rate: 7.125%.

APR: 7.267%.

Backstory: I was approached by past clients in Marin County who had sent their last child off to college after spending many years raising their kids in the suburban lifestyle.

Given their new empty nester status, they wanted to get back to the city life that they had loved so much before moving to the suburbs to raise their family. The condo market was extremely competitive in San Francisco, and they asked me if I could get them a bridge loan so that they would have a much stronger offer to buy the condo, because they did not want to make an offer contingent on the sale of their current home.

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Typically, bridge loans come with a fee to the lender of well over 2% of the loan amount. I told them that although ProMortgage does work with bridge loan lenders, I recommended that we go with one of our other lenders who offers an “alternative bridge loan” that is less expensive.

The lender fee on the bridge was only 1% of the loan amount. This loan provided financing using 70% of the equity of their current home’s appraised value.

The home appraised at $2.8 million and they had a mortgage of $1,060,000. The bridge alternative loan amount was $1.96 million, which paid off their old mortgage with $900,000 left over to apply as the down payment toward their condo purchase.

This put them in a strong offer position, given that they would be putting over 50% down and also given that they did not need to first sell their home. This alternative loan did not count toward their debt obligation so they easily qualified for their new condo.

Once they sell their home, they will likely have $700,000 in net sales proceeds. I told them that they could pay off or pay down the new condo mortgage, but they planned to hold onto the money so that they can gift money to their children to contribute to the down payment when they buy their first home.

My clients are so excited to soon shed all of the responsibilities of their house and spend their time enjoying walking to shops and restaurants in their neighborhood and attend the arts without going over the bridge.