Downsizing and Real Estate Paying for Senior Living: Bridge Loans 1/8/2025 | By Annie Tobey Part of the decision in moving to senior living for the first time involves the finances. For some older adults, bridge loans provide the answer. Adults making their first move to a senior living community need to decide how they’ll finance a new residence. They need to cover the costs while ensuring the health of their nest eggs. While selling a home can finance the move, rushing that process can cut into the profits and minimize the income. However, sometimes the move must be made quickly – for example, a health episode has necessitated the move or the community is offering a short-time promotion. “A home equity line of credit can act as a bridge loan to help you pay for your senior living move now and have time to sell your home,” counsels Elias Papasavvas, founder and CEO of Second Act Financial Services. Papasavvas has worked with bridge loans specifically for senior living, giving him background in understanding the complexities of this form of financing A bridge loan is a short-term loan used to provide immediate cash flow, using the home’s equity as collateral. It typically carries a higher interest rate than other credit options. “Often, the cost of the bridge loan is low compared to the better price you can get for your home when it is properly staged and you have the power to wait for the right offer without feeling pressured or rushed,” says Papasavvas. Before taking the leap, though, borrowers should understand the basics and know what to look for. How does a bridge loan for senior living work? There are two types of bridge loans for senior living, Papasavvas explains. One is a home equity line of credit where the home is the collateral. If the borrower has a solid credit score and the equity is sufficient, adult children don’t need to co-sign. The process is: You apply for an overall line of credit amount. If approved, each month you draw what you need to fund your new senior community, such as entrance fees or monthly fees. You make interest-only payments on your outstanding balance. These payments are smaller and more affordable than if you were paying both your mortgage and your senior living fees. When your home sells, you pay back the loan. Another is personal loans or lines of credits. The loan may require a co-signer, such as an adult child, due to debt-to-income requirements. This is especially true if the senior is retired. What to know in shopping for a bridge loan As with any business, some are more reputable and trustworthy than others. In looking for the right lender for your situation, consider: Licenses and trustworthiness. Use a reputable lender such as a bank (or division of a federally licensed and regulated bank), credit union, or another financial service business that holds all necessary licenses. Be careful of unlicensed specialty finance lenders – these lenders may have higher origination fees or interest rates compared to licensed lenders and carry higher risks. Reputation and history. Get recommendations from trusted sources and check review sites like the Better Business Bureau. Interest rates and fees. “Lenders are required to disclose interest rate ranges before you apply,” Papasavvas says. “If when you ask about interest rates and origination fees a lender tells you ‘it depends on your credit’ but does not give you the range, be cautious.” The fine print. Ask about details such as home equity requirements, repayment options, prepayment penalties, and loan extensions. “If [your home] doesn’t sell before the loan comes due, you may owe the full amount of the bridge loan on top of your new mortgage payment,” says Beth Buczynski of NerdWallet. “This could lead to financial stress or even default.” Experience. Look for a lender who is experienced in working with the complexities of bridge loans and in senior care financing. Using an inexperienced or unscrupulous lender could result in problems such as a “clouded title,” i.e., an unclear title that could negatively impact the sale of your home. “Traditional licensed lenders place a lien on a home. That is considered an appropriate and required action,” Papasavvas explains. “‘Clouding a title’ is a practice that some in the banking industry frown upon. Be cautious of lenders who are not licensed to do home equity line of credit loans and who instead offer an unsecured or personal loan and place a lien on your home equity, thereby ‘clouding’ your home’s title.” In addition, Papasavvas warns, “Be wary of lenders that ask other family members to co-sign if your credit score is good and your home is the collateral.” Whether through a bridge loan or another option that works for your financial situation, you can begin your new life chapter with the assurance that you’ve taken the best steps forward. Read More Annie Tobey Seniors Guide editor Annie Tobey has been involved in publishing for more than three decades, editing magazines, creating hundreds of freelance articles for local and national publications, and publishing two books. Her first book, “For Any Young Mother Who Lives in a Shoe” (Judson Press, 1991), offered humor and guidance to parents of young children. More recently, “100 Things to Do in Richmond Before You Die” (Reedy Press, Sept. 1, 2023) gave Tobey the opportunity to share her love for her hometown of Richmond, Virginia.