Bridge Loans for Seniors: A Complete Guide

Expenses don’t stop piling up after we’re done working. Maybe you’ve recently retired or you’re helping a parent who’s living on their retirement income. When a situation requiring a bigger financial commitment arises, retirement savings can be stretched a little thin. 

A bridge loan might be a temporary solution to your cash flow problem. To that end, this guide will outline everything you need to know about bridge loans for seniors and some bridge loan alternative financing options for those who don’t want to take on the risk of a loan.

Can You Qualify for a Bridge Loan If You’re Retired?

Yes, you might be able to qualify for a senior bridge loan even if you’re retired. A bridge loan is a short term loan that does exactly what the name implies—it builds a bridge between lapses in financing.

The most common reason someone utilizes a bridge loan is to pay for a new home while they’re trying to sell their current house. As you might imagine, there are some pretty stringent criteria you must meet to qualify for a bridge loan, including:

• Excellent credit
• A low debt-to-income ratio
• Ample cash savings to make a monthly payment
• Collateral to put up for the loan

Therefore, retired individuals may qualify for a bridge loan if they meet their lender’s specific financial criteria.

Are Bridge Loans a Good Choice for Seniors?

As with any type of financing, there’s a lengthy list of pros and cons of bridge loans. Let’s break down some of the keys components to consider prior to applying for a bridge loan: 

Pros of Bridge Loans

Seniors often look to downsize from a large, family home to a smaller condo or apartment. A bridge loan might be able to provide the needed financial flexibility to do so. 

If you need cash quickly and cannot wait for another financing option to surface, then a bridge loan might offer the convenience and accessibility you require. Along with these attributes, bridge loan pros include:

• They’re beneficial in a seller’s market when you want to buy another property
• The fast cash from a bridge loan can make your home buying offer more appealing
• They can help you avoid a gap in cash flow
• They might allow you to pay for unexpected expenses right away

Bridge loans are especially helpful when you’re confident that you can sell your current home quickly before the interest starts to accumulate. 

Cons of Bridge Loans

That being said, there are also downsides to bridge loans. Before you sign the dotted line, some of the cons to consider include: 

• Lenders charge a higher interest rate on bridge loans
• Fees on a bridge loan can also be on the higher end
• You’ll have two monthly payments to make
• You risk losing your home if you can’t pay back the loan
• Bridge loans can be hard to qualify for
• Short term loans must be paid back quickly
• Retired seniors don’t usually have a lot of cash flow

Everyone’s situation is different so, in some cases, those pros may outweigh the cons. 

How Can Seniors Use a Bridge Loan for Assisted Living?

Another occasion that you might want to consider a bridge loan for—as a senior—is assisted living. A bridge loan for assisted living might help cover some of the expenses incurred during the transition from living at home to moving into a senior care facility. 

Senior living communities can be expensive and you’ll have to pay for:

• The monthly cost of living at the senior housing facility
• Entrance fees when you first move in
• The cost to move your belongings to the senior housing  facility

Typically, a move to a senior care facility occurs with rapidity and a lack of preparation. If you (or your parents) don’t have the cash on hand to pay for the moving expenses and the first few months of care, then a bridge loan may help. 

After the home you or your parents lived in is sold, the proceeds from the sale can be used to pay back the bridge loan and cover the assisted living facility expenses moving forward.

An Alternative to Bridge Loans for Seniors

Bridge loans can provide a short-term solution for seniors who need access to cash quickly. 

For example, if your parents need to transition to an assisted living facility but you still need to sell their home, a bridge loan can help support their financial health in the interim. However, bridge loans carry their own unique risks and are not a fit for every situation. 

If you want an alternative to a bridge loan, consider looking into a sale-leaseback program. A sale-leaseback allows you to sell your house, convert your home equity to cash and provide you flexibility.

Key Takeaways

When it comes to bridge loans for seniors, consider the pros and cons and speak with a financial advisor about whether or not a bridge loan is the right option for you and your family. If it isn’t quite right or you are concerned about qualifying, there are plenty of alternative financial solutions like home equity programs and sale-leasebacks for you to consider.

Sources: 

Forbes. Is a Bridge Loan Right for You? https://www.forbes.com/advisor/loans/bridge-loan/