Colorado Residential Bridge Loan

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.

Advantages. 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.

Requirements for Bridge Loans

As of Sept. 1, 2024 in order to qualify you will need to satisfy the above:

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)

Primary Home Bridge Loans Available

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.

Who can benefit from a short term bridge loan?

This loan program is designed for borrowers who have equity and want funds quickly for a down payment or all-cash offer. Here’s who it helps the most:

Areas Served

We serve borrowers across the state of Colorado which includes the following cities and adjacent area:

• Aurora
• Denver
• Centennial
• Fort Collins
• Cherry Creek
• Parker
• Highlands Ranch
• Englewood
• Longmont
• Colorado Springs
• Lakewood
• Vail

Disclosure: Minimum loan amount is $250,000 for residential. Loan programs are subject to change per lender at any time until the loan is approved and the rate is locked. Borrowers must be approved by underwriting. Not all applicants will qualify.