If you already own a home and are thinking about moving, you may have run into one of the most frustrating real estate problems:
How do you buy the next house when your down payment — and possibly a big part of your purchasing power — is tied up in the house you already own?
The traditional options aren’t always very appealing.
You can sell your current home first and hope you find another house quickly. You can make your new purchase contingent on selling your current home, which may make your offer less attractive to a seller. Or you can try to qualify while carrying two homes and potentially come up with the new down payment from other assets.
Fortunately, there are now several Buy Before You Sell and bridge loan programs designed specifically to solve this problem.
As a mortgage broker, we can evaluate several different options rather than trying to force every homeowner into the same program. Three of the solutions we frequently consider are Knock, HomeLight and UpEquity.
What Is Buy Before You Sell?
Buy Before You Sell programs are designed to let you purchase and move into your next home before your current home is sold.
Depending on the program and your situation, this can potentially allow you to:
- Access equity from your current home for the down payment on your new home
- Make an offer without a home-sale contingency
- Remove or reduce the impact of your current mortgage when qualifying for the new loan
- Move into the new home before putting your old home on the market
- Avoid temporary housing and moving twice
- Sell your old home vacant, rather than constantly cleaning it for showings while you still live there
The last point is easy to underestimate. Moving first can give you and your real estate agent time to clean, repair, stage and market the old home without having to live through the process.
Option #1: Knock Bridge Loan
The Knock Bridge Loan is one of the more straightforward ways to access the equity tied up in your current home.
Knock can provide bridge financing that can be used for expenses such as the down payment on the new home, moving expenses, repairs or other costs associated with the transition.
More importantly, Knock’s program can allow qualified borrowers to make an offer on their next home without a contingency requiring their current home to sell first.
Knock also offers Bridge Loan Plus, which takes the concept a step further. For qualifying homeowners, Bridge Loan Plus can pay off the existing mortgage on the departing residence. This can be particularly helpful when the existing mortgage payment would otherwise prevent the borrower from qualifying for the new mortgage.
This distinction matters.
Sometimes a homeowner has plenty of equity but still can’t qualify for the new home because underwriting sees two mortgage payments. In those situations, solving the debt-to-income problem may be just as important as accessing the equity.
Option #2: HomeLight Buy Before You Sell
HomeLight Buy Before You Sell approaches the problem a little differently.
HomeLight can provide qualified homeowners access to a portion of the equity in their current home before it sells. According to HomeLight’s current program information, eligible homeowners may be able to access up to 90% of their equity, with equity unlocks up to $2 million, depending on the transaction and borrower qualifications.
HomeLight also places a backup offer on the departing residence. That structure can help eliminate the home-sale contingency and, when program and mortgage guidelines permit, remove the departing residence payment from the borrower’s debt-to-income calculation.
The basic process looks something like this:
Get the current home approved → determine available equity → shop for the next home → make a non-contingent offer → close and move → list and sell the old home.
HomeLight currently advertises its equity unlock as a 0% interest bridge loan, although program fees and other costs can still apply.
For homeowners with significant equity who don’t necessarily have that equity sitting in a checking account, this can be a very useful tool.
Option #3: UpEquity Trade Up + Equity Advance
UpEquity separates its Buy Before You Sell solution into two pieces: Trade Up and Equity Advance.
Trade Up provides a backup offer on your current home. That can allow you to shop for your next home without making the purchase contingent upon selling your old one.
Equity Advance can then unlock equity from the current home to help fund the purchase of the new home.
You can potentially use Trade Up by itself or combine it with Equity Advance depending on what problem we’re trying to solve.
For example, one homeowner may have plenty of liquid assets for the new down payment but simply needs a solution for the existing house and mortgage liability. Another homeowner may have $300,000 of equity but very little available cash and needs to unlock some of that equity to make the new purchase work.
That’s why the structure matters more than simply saying, “You need a bridge loan.”
Which Buy Before You Sell Program Is Best?
There isn’t one answer.
Knock, HomeLight and UpEquity have different eligibility requirements, property requirements, geographic availability, costs and methods of handling the equity and existing mortgage.
We generally start by answering three questions:
1. Do you need equity from your current home for the new down payment?
If not, we may not need as much bridge financing.
2. Do we need to eliminate your existing mortgage payment to qualify for the new home?
This is often the bigger issue than the down payment.
3. Do we need to eliminate the home-sale contingency to make your offer competitive?
In a competitive market, an offer that depends on selling another property can put you at a disadvantage against buyers who don’t have that contingency.
Once we know which problems need to be solved, we can compare the available programs and determine which structure makes the most sense.
What About a Traditional Bridge Loan or HELOC?
Those are options too.
In some situations, a traditional bridge loan or Home Equity Line of Credit may be less expensive or simpler than a full Buy Before You Sell program.
For example, if you have substantial income, easily qualify carrying both mortgages and only need $100,000 from your current home’s equity for a down payment, a HELOC or traditional bridge loan might accomplish everything we need.
On the other hand, if the existing mortgage payment prevents you from qualifying or you need to make a non-contingent offer, one of the newer Buy Before You Sell programs may be considerably more useful.
The goal isn’t to use a particular program. It’s to find the least expensive and least complicated way to get you from Home A to Home B.
A Simple Example
Suppose your current home is worth $800,000, you owe $250,000, and you’re looking to purchase a new home for $900,000.
On paper, you have roughly $550,000 of equity.
The problem?
Most of that money is trapped inside your current house until it sells.
A Buy Before You Sell or bridge strategy may allow you to access a portion of that equity for your new purchase, potentially eliminate the home-sale contingency, close on the $900,000 home and move in before selling the $800,000 home.
Your old home can then be prepared, listed and sold on a more normal timeline.
Instead of:
Sell → move somewhere temporary → shop → buy → move again
the process can become:
Buy → move once → sell.
For a lot of homeowners, that’s the real value of these programs.
Buy Before You Sell in Colorado — and Beyond
These programs can be especially useful in markets like Denver, Golden, Lakewood, Arvada and the rest of Colorado’s Front Range, where homeowners may have accumulated substantial equity but don’t necessarily want to sell their current home until they’ve secured the next one.
Availability varies by program, property and location, and we also work with clients outside Colorado where these programs are offered.
If you’re considering moving but feel like you’re stuck in your current home because you need to sell it before you can buy the next one, don’t automatically assume that’s your only option.
We can run the numbers several different ways — including Knock, HomeLight, UpEquity, traditional bridge financing and HELOC options — and compare the costs, available equity and qualifying impact before you put your home on the market.
Sometimes the best solution isn’t selling first.
It’s building the right bridge between the house you own and the house you want next.
Program availability, guidelines, fees, equity amounts and qualification requirements vary and are subject to change. Not all borrowers or properties will qualify. This information is for educational purposes and is not a commitment to lend.
