Rocket introduces buy-before-you-sell bridge financing

Rocket Mortgage unveiled a new equity-backed financing product aimed at giving homebuyers an advantage when vying for homes in competitive markets.

The Detroit-based lender's new bridge loan offers prospective buyers the opportunity to draw into their accrued equity to put down an offer on a new purchase while still living in their existing property. Borrowers will have access to home equity for down payments or closing costs, easing many of the leading causes of stress during relocation, the company said.

"It removes one of the biggest barriers to moving: immediate access to the equity in their current property. With this new flexibility, buyers can quickly and confidently secure their next home," said Bill Banfield, Rocket's chief business officer and economist, in a press release. 

The tool is expected to be particularly helpful to customers in markets where homes are still attracting scores of buyers, pushing final costs above initial asking price. It also will prevent the need for buyers to find temporary accommodations until their new purchase closes, giving them flexibility to obtain the best offer in their selling process. 

Terms of the bridge loan offer Rocket clients six months to sell their home after origination, with payments due only on interest during that period. Customers are also required to have an existing purchase mortgage with Rocket. To become eligible for bridge financing, borrowers' current homes must be listed, under contract with a real estate agent or have a guaranteed buyout agreement in place.  

Rocket joins other leading lenders, including the likes of Lower and Guild Mortgage, in introducing some form of equity-backed funding that gives customers the opportunity to buy a new home before they sell, or "trade in" their property. Similar offerings have also come from emerging fintechs, such as Calque and Homelight, companies that make their products available through mortgage brokers and lenders.    

Total home equity available to be tapped by homeowners currently sits at $11.5 trillion, according to research published by ICE Mortgage Technology in June. In data published last year, Rocket estimated that the average American homeowner had close to $181,000 of equity available to draw from, a "powerful resource" to help them make strong bids for a home. 

The launch of bridge lending at Rocket comes on the heels of its parent company's merger announcements with Redfin and Mr. Cooper. The opportunity to capture and retain the customer from the initial homebuying stage through the mortgage origination and closing process has been noted as a key driver of Rocket's acquisition strategy.