You found the right next home, but your current place has not sold yet. In San Mateo County, where listings can move fast, timing often decides who wins. You want to make a strong offer without taking on avoidable risk. In this guide, you will learn how bridge loans work for move-up buyers, what they cost, where the risks are, and smarter ways to plan your move. Let’s dive in.
What a bridge loan is
A bridge loan is short-term financing that covers the gap between buying your next home and selling your current one. You use it to unlock equity so you can write a non-contingent offer and close on the new place. When your current home sells, you use the proceeds to pay off the bridge loan.
Common structures include closed-end bridge loans with a clear payoff date, open-end bridge loans that are more flexible, and using a HELOC or home equity loan as the bridge. Some buyers also carry two mortgages for a short period without a formal bridge product, which raises carrying costs.
Why bridge loans fit San Mateo move-ups
San Mateo County is a higher-priced, competitive market with tight inventory. In these conditions, sellers often favor clean, non-contingent offers. A bridge loan helps you compete by removing the home-sale contingency and providing funds to close on the new property.
At the same time, higher prices mean larger loans and bigger potential carrying costs. Your equity position, reserves, and current market speed all matter. The decision to use a bridge loan should consider how quickly homes like yours are selling and how confident you are in your pricing strategy.
How repayment and terms work
Most bridge loans require interest-only payments each month until your current home sells. The principal is due when you close the sale. Terms are usually short, often 6 to 12 months, with possible fees for early payoff, extensions, or missed timelines.
Lenders may cross-collateralize your current home and the new purchase. Some programs fund only the down payment, while others fund the full purchase bridge. Your lender will explain how payoff, prepayment, and extensions will work in writing.
Costs to expect
Bridge loans are generally more expensive than standard mortgages. Pricing and terms vary by lender and your credit profile. Expect the following cost areas:
- Interest rate: higher than a typical purchase mortgage.
- Origination fees: often charged upfront as points or a percentage.
- Carrying costs: you may pay two mortgages, property taxes, insurance, HOA dues, and utilities at once.
- Third-party fees: appraisal, title and escrow, recording, and related closing costs.
Get written estimates and compare options side by side before you commit.
How lenders qualify you
Underwriting focuses on your ability to carry both homes and the strength of your equity. Lenders commonly review:
- Credit score, debt-to-income ratio, assets, and reserves.
- Appraisal and marketability of your current home.
- Combined loan-to-value across both properties.
- Proof that your current home is listed or under contract, plus your new purchase contract.
- Standard documents like pay stubs, W-2s or tax returns, bank statements, recent mortgage statements, and ID.
Expect lenders to require several months of reserves to cover payments while the bridge is outstanding.
Risks and how to manage them
Bridge loans increase speed and flexibility, but they come with real risks. Key issues include:
- Double carrying costs if your sale takes longer than planned.
- Appraisal or market risk if your current home sells for less than expected.
- Prepayment penalties or extension fees if timelines slip.
- Challenges qualifying for permanent financing if your situation changes.
- Foreclosure risk if you cannot meet payments.
You can manage these risks with a conservative plan and the right team:
- Budget extra months for carrying costs and keep cash reserves.
- Set a clear pricing and marketing plan to reduce days on market.
- Negotiate rent-back or flexible closing terms when possible.
- Seek bridge terms with clear extension options and payoff procedures.
- Line up alternatives like a HELOC as a backstop.
Alternatives to consider
Bridge loans are not the only path. Depending on your equity, risk comfort, and market conditions, these options may fit:
- HELOC or home equity loan: often lower cost if you have available equity and lender approval.
- Carry two mortgages temporarily: for financially strong buyers who can qualify for both loans.
- Home-sale contingency: less competitive in fast markets, but viable in a balanced market.
- Rent-back or late move-out: coordinate timelines to reduce overlap.
- Personal savings or asset sales: fund the down payment without new debt.
- Portfolio or private lenders: more flexible terms, often higher cost.
A step-by-step game plan
Here is a simple workflow for a San Mateo move-up:
- Get pre-approved for your next mortgage and explore bridge or HELOC options.
- Request a valuation or appraisal of your current home to estimate equity.
- Write the offer on your next home with proof of funds or bridge pre-approval.
- Apply for the bridge loan with your purchase contract, listing plan, and financials.
- Close on your new home using bridge proceeds or HELOC draws as needed.
- List and market your current home aggressively, then accept an offer.
- Close the sale and use proceeds to pay off the bridge loan.
- Confirm payoff and ensure final recordings are complete.
Documents lenders commonly request include your new purchase contract, listing agreement or accepted offer on your current home, recent mortgage statements, pay stubs, tax returns, bank statements, and ID.
Tax and legal notes in California
The tax treatment of interest can depend on how funds are used and whether the loan is secured by a qualified residence. Some bridge loan interest may be deductible, but this varies with current tax law. Consult a CPA for advice.
Property tax reassessment is driven by transfers and California rules such as Proposition 13 and Proposition 19. A bridge loan itself does not trigger reassessment, but moving can change your assessed basis. Confirm transfer taxes, recording fees, and local rules with your title company or county offices.
An illustrative scenario
You buy a higher-priced home in San Mateo County using a bridge loan secured by your current home. During the bridge term, you make interest-only payments and list your current property with a strong pricing and marketing plan. If it sells within your expected timeline, you pay off the bridge and settle into your new place on schedule. If it takes longer, you carry both homes for a few extra months and may pay an extension fee, which you accounted for in your budget.
Getting expert help in San Mateo
A strong plan blends financing strategy with listing execution. You gain an edge when your agent and lender coordinate on pricing, timelines, and documentation. With Compass tools like Concierge for pre-listing improvements and Coming Soon or Exclusives for early exposure, you can speed up your sale and reduce holding time. That can lower risk and make your bridge period smoother.
If you want a tailored plan for your move-up, connect with Daniel Flores. You will get responsive guidance, lender introductions, and a clear step-by-step strategy from offer to payoff.
FAQs
What is a bridge loan for San Mateo move-up buyers?
- A short-term loan that lets you buy your next home without waiting to sell your current one, then you repay it from sale proceeds.
How long do bridge loans typically last in California?
- Many run 6 to 12 months with possible extensions for a fee; exact terms vary by lender and your profile.
Can I use a HELOC instead of a bridge loan in San Mateo County?
- Often yes if you have sufficient available equity and lender approval; HELOCs can be lower cost but follow different qualification rules.
How much equity do I need for a Peninsula bridge loan?
- Lenders look at combined loan-to-value and reserves; many expect a strong equity cushion, though specifics vary widely.
Are bridge loan interest payments tax deductible in California?
- Possibly, if the loan is secured by a qualified residence and funds are used for eligible purposes; confirm with a CPA.
What if my current home takes longer to sell in San Mateo?
- You may face extra carrying months and extension fees; plan conservatively, price strategically, and negotiate flexible terms where possible.
