Found the right Del Mar home but haven’t sold yours yet? In a competitive, low‑inventory coastal market, you often need to act fast and write a clean, non‑contingent offer. A bridge loan can give you the funds to buy first and sell second, without scrambling for temporary housing. In this guide, you’ll learn how bridge loans work, what they cost, when they make sense in Del Mar, smart alternatives, and a clear step‑by‑step plan to use them well. Let’s dive in.
What is a bridge loan?
A bridge loan is short‑term financing that helps you purchase a new home before you sell your current one. It is usually secured by the equity in your existing property and typically gets paid off when your home sells or when you refinance into a permanent mortgage. Many products are interest‑only for a limited period and carry higher fees than standard mortgages. For a plain‑English overview, see this explanation of what a bridge loan is from Investopedia’s bridge loan guide.
In Del Mar, strong demand and thin inventory make non‑contingent offers common. If you have significant equity and need to win a competitive home near the beach or Torrey Pines, a bridge loan can keep you moving without rushing your sale.
How a bridge loan works
Timeline at a glance
- Get preapproved for both your new mortgage and a potential bridge loan.
- Use the bridge funds for your down payment on the new property, then close on your purchase.
- List and sell your current home.
- Use sale proceeds to pay off the bridge loan and finalize your long‑term mortgage on the new home.
Collateral, terms, and payments
- Most lenders secure the bridge loan with your current home. Some may also cross‑collateralize your new home.
- Terms are short, commonly 6 to 12 months, sometimes with extensions.
- Payments are often interest‑only, but structures vary by lender. Because of the short term and added risk, costs tend to be higher than a traditional mortgage. You can review typical structures in Bankrate’s bridge loan primer.
Repayment triggers
- Sale of your current home.
- Refinancing into a permanent mortgage on the new property.
- End of the loan term, which may require payoff or conversion.
Costs and how to qualify
Bridge loans come with several cost components. Ask for each item in writing.
- Interest: generally higher than conventional mortgage rates.
- Origination and lender fees: flat or percentage‑based.
- Third‑party costs: appraisal, title, underwriting, escrow, and closing fees.
- Possible exit fees or prepayment penalties.
Common qualification factors include:
- Strong equity in your current home. Lenders often cap combined loan‑to‑value based on expected sale proceeds.
- Credit score, income, and debt‑to‑income ratio. You will be carrying two loans temporarily.
- The marketability of your current home, including likely days on market and comparable sales.
Important underwriting notes:
- A bridge loan counts as debt during approval for your new mortgage. Some lenders treat it like a full payment; others use a fraction if interest‑only. Confirm treatment upfront.
- Ask if the lender cross‑collateralizes both properties and how that affects title and refinancing options.
- Request a written payoff plan and whether there is any prepayment penalty.
Tax note: Bridge loan interest may qualify as mortgage interest, subject to IRS rules and limits. Review the details in IRS Publication 936 on home mortgage interest and consult your tax advisor.
Del Mar market context
Del Mar is an affluent coastal market with high price points and lean inventory. Desirable homes often receive strong interest, so non‑contingent offers tend to perform better. Seasonal patterns can tighten supply, especially in spring and early summer, which increases the value of flexible financing.
For current trend data, review local association reports and city‑level snapshots. You can track broader market indicators through the San Diego Association of REALTORS market statistics and the California Association of REALTORS market data portal. Because conditions change quickly, time‑stamp any figures you rely on and refresh them before making financing decisions.
Alternatives to bridge loans
There is no one‑size‑fits‑all solution. Compare your options side by side.
Home sale contingency
- Pros: Reduces the risk of carrying two homes.
- Cons: In competitive Del Mar scenarios, sellers often prefer non‑contingent offers.
Rent‑back from your buyer
- Pros: Close your sale, stay as a short‑term tenant while you buy.
- Cons: Requires buyer flexibility and clear terms.
HELOC or home equity loan
- Pros: Can be lower cost than a short‑term bridge; flexible line access.
- Cons: Approval and equity required; still counts in your debt‑to‑income.
Sell, then buy
- Pros: Simplest financially; use cash from your sale.
- Cons: May require temporary housing and multiple moves.
Private or hard‑money bridge
- Pros: Fast funding and flexible underwriting.
- Cons: Highest cost; short timelines and stricter terms. Use with full disclosure and careful planning.
Who should consider a bridge loan
A bridge loan can be a strong fit if you:
- Have substantial equity and want to compete with non‑contingent offers.
- Can handle short‑term higher costs and a brief period of dual obligations.
- Have a clear backup plan if your home takes longer to sell.
You may want to avoid a bridge loan if you:
- Have limited equity or a thin margin between payoff and expected sale price.
- Would struggle with potential double payments or rate changes.
- Are uncomfortable with market risk between purchase and sale.
Step‑by‑step plan for Del Mar
Use this checklist to execute smoothly.
- Pre‑listing analysis
- Ask your agent for a data‑driven estimate of expected sale price and days on market for your current Del Mar home.
- Decide on timing: list before, during, or after your purchase, based on your risk tolerance and logistics.
- Lender alignment
- Speak with at least two lenders that offer bridge loans. Request written quotes showing interest, fees, and monthly payment if your sale is delayed.
- Confirm in writing how the bridge will be treated in underwriting for your new mortgage.
- Ask about cross‑collateralization, payoff instructions, and any prepayment penalty.
- Licensing and disclosures
- Verify lender credentials using NMLS Consumer Access and the California DFPI website.
- Review standardized loan estimates and closing disclosures. For a refresher on what to look for, see the CFPB’s plain‑language explanation of the Loan Estimate.
- Purchase strategy
- Structure your offer to be competitive: clean terms, realistic timelines, and proof of funds from the bridge approval.
- Coordinate closing dates with your lender and escrow to ensure your bridge funds arrive when needed.
- Escrow and title coordination
- Make sure both escrow officers know a bridge loan is in play and have clear payoff instructions.
- Confirm how liens will be recorded and satisfied when your current home sells.
- Backup plan
- Build a contingency plan for a slower sale: cash reserves, a possible bridge extension, or a HELOC as a cushion.
- Keep your long‑term rate‑lock strategy aligned with the projected payoff date.
Hypothetical numbers for clarity
The following is an illustrative example only. Your costs and structure will vary by lender and market conditions.
- Current home estimated sale price: $2,000,000
- Existing mortgage payoff: $800,000
- Available equity before bridge: $1,200,000
- Lender advances up to 70% of expected sale proceeds toward the new down payment (illustrative policy).
- Bridge loan amount: $1,000,000 (example)
- Interest structure: interest‑only at 8% for 6 months (example)
Payments and cost in this scenario:
- Monthly interest payment: $1,000,000 × 0.08 ÷ 12 = $6,667
- Total interest over 6 months: about $40,000, plus origination and closing fees
This shows why a bridge is a short‑term tool. The convenience and speed can be worth it if you secure the right home and sell promptly at a strong price.
Risks to plan for
- Sale delay: If your current home takes longer to sell, you may carry extra months of payments or need an extension.
- Market shift: Price changes between your purchase and sale can reduce net proceeds.
- Underwriting friction: The bridge may reduce your borrowing capacity for the new mortgage. Get clarity before you write offers.
Risk management tips:
- Price your listing based on fresh comps and honest days‑on‑market expectations.
- Keep a cash cushion for a few extra months of payments.
- Confirm that sale proceeds can pay off the bridge without penalties.
Where to get help
You have options. Start with local mortgage brokers or regional banks that actively offer bridge financing and can coordinate with San Diego escrow and title teams. Always verify licensing and request multiple written quotes so you can compare total costs, payoff terms, and timelines side by side.
If you want hands‑on strategy for timing, pricing, and offer strength, connect with a local advisor who handles high‑end coastal transactions. With Compass tools, private network reach, and polished listing preparation, Bayley Bachiero can help you buy decisively and sell for maximum value.
FAQs
How long do bridge loans last in California?
- Most consumer bridge loans run 6 to 12 months, sometimes with extensions, depending on lender policies and your sale timeline.
Will a bridge loan affect my new mortgage approval?
- Yes. Lenders count the bridge loan in your debt‑to‑income during underwriting, which may reduce borrowing power. Confirm the exact treatment with your loan officer.
How much can I borrow on a bridge loan?
- It depends on your equity and lender limits. Many lenders cap advances based on a percentage of expected sale proceeds or combined loan‑to‑value.
Are bridge loan payments tax‑deductible?
- Bridge interest may be deductible as mortgage interest if it meets IRS rules and caps. Review IRS Publication 936 and consult your tax advisor.
What if my current home does not sell on time?
- You can request an extension, refinance to a longer‑term loan, or adjust pricing to accelerate the sale. Each option has cost and timing impacts; plan for contingencies early.
