Navigating Compass Bridge Loans—An A-Z Guide for Borrowers

by HMLS

Compass, Inc. is one of the top real estate technology platforms in the U.S. It’s a flourishing online marketplace that supports the entire cycle of buying, selling, and renting real estate. Driven by market demand, the company launched additional bridging services in 2019 to help homeowners who wanted to buy another home while waiting to sell their current one. What is the service all about, and can you still access it?

Compass bridge loans may sound like the ultimate dream for a homebuyer, but there are several issues with the product that we noticed while digging around. If you’re stuck in the buy-before-you-sell conundrum, our guide can help you navigate further. We will discuss:

  • Compass bridge loan services
  • Their current availability
  • Alternative bridging options

Compass Bridge Loan Services—The Whats and Hows Explained

Bridge loans are a popular short-term financing tool for businesses and have become crucial to the real estate industry as well. Compass bridge loan services were initiated to help real estate buyers on the platform who are between properties. 

The most common bridging scenario is when you want to buy a new home using the proceeds from the sale of your current home. The timeline and logistics of such deals are usually off, especially if you’re in a competitive online real estate marketplace like Compass. Some inherent problems buyers face include:

  • Adding sale contingencies on purchase applications—If you’re looking to buy a specific property via platforms like Compass, you may have to put a sale contingency on your application form, which the seller may find off-putting
  • Rushing into the sale of the existing property—You may have to settle for significantly lower prices if you need to sell your current home fast, which is a total waste of the equity you’ve built up. The arrangement can also force you to temporarily live in a rental, causing you unnecessary moving expenses
  • Losing out on the desired property—Hot properties advertised on Compass tend to find buyers quickly, so you can easily miss a suitable home if you cannot conjure up the funds in time

The Compass bridge loan program alleviates all of these setbacks by connecting its users with vetted lenders who provide temporary financing to anyone with home equity.

Source: Thirdman

Features of a Compass Bridge Loan

A Compass bridge loan is suitable for people working in collaboration with a lender and one or more Compass agents to buy or sell a home. It’s not like your traditional bridge product because you need the Compass ecosystem to set it up. The following table outlines the distinguishing features of the product:

FeatureDescription
Various lenders availableCompass emphasizes that it doesn’t do the actual lending. Users can choose from a pool of vetted lenders listed by the company, such as Better.com and Freedom Mortgage, to apply for a bridge loan. You can also talk to your Compass agent about suitable lenders
No standard interest rateThe interest rate, closing cost, appraisal fee, and similar elements are determined by the lender you choose—not Compass. The interest rates are usually in the same range as home equity line of credit (HELOC) rates, i.e., 7.24%–21%
Short tenureThe bridge loans applied through Compass are typically for 8–12 months, although there may be prepayment penalties attached to the deal
Bridge Loan Advance optionIf you qualify for a bridge loan but cannot manage the interest payments, Compass can hook you up with a Bridge Loan Advance plan offered by Notable Finance, LLC (a third-party lender). The lender can cover your interest payments for up to six months without charging any interest. You have to repay once you receive the sale proceeds of your home 

How To Get and Use a Compass Bridge Loan

Acquiring a Compass bridge loan requires you to rely heavily on agents. Check out how the process pans out:

  1. Work with a Compass agent to find buyers for your home
  2. Find a bridge lender of your choice within the Compass ecosystem
  3. Apply for the loan
  4. Submit the documentation to get the pre-approval confirmation
  5. Locate a Compass agent to help you find your new home (this can be Step 2 as well if you want to keep looking at homes while figuring out the bridge)
  6. Apply for the desired home without any sale contingencies while your bridge loan is being set up
  7. Find and move into your new home using the bridge loan money as a down payment
  8. Talk to your agent about getting a Bridge Loan Advance if necessary
  9. Sign the Bridge Loan Advance agreement
  10. Settle the bridge loan and Bridge Loan Advance debt once your home sells

Compass doesn’t publish a list of vetted lenders on the website. The company also offers a Concierge service that allows you to renovate or upgrade your old home pre-sale to fetch a higher price—it can be integrated with the bridge loan service if you talk to your agent.

Source: Maurice Williams

Can You Still Get a Bridge Loan at Compass?

Compass bridge loans may seem like the perfect instrument for transitioning between homes, but their current functionality or efficiency is a bit questionable. The service was launched in late 2019, but after the unfortunate pandemic-triggered slowdown in 2020, Compass had to scale back its Concierge and Bridge programs.

There are no official announcements regarding the resumption of these services, but the company does maintain a partially informative bridge loan section on the website. It’s also hard to confirm if Notable Finance, LLC is still on board to offer Bridge Loan Advances. We recommend talking to a Compass agent in your area to get the info relevant to your state.

As for the quality of Compass bridge loan services, we didn’t find any reviews about the product online. It’s a need-based loan designed to make the flow of transactions easier at Compass, but it also limits your options in terms of the lenders you deal with. Some borrowers may find it even more confusing to deal with the extra paperwork burden. To add to their woes, there is little clarity over the various agreements they sign throughout the process.

Compass Real Estate Bridge Loans Alternatives

Compass bridge loans came into existence because of a simple flaw in the traditional lending scenario—banks and mortgage companies usually don’t offer such products. Bridge loans are usually offered by small regional banks that run a less voluminous business than bigger lenders. To qualify, you need to have an excellent credit score and low debt.

Compass, despite not being a lender, envisioned making the process easier by streamlining it via agents. That being said, most borrowers are unaware of a more convenient and transparent bridging option—getting a hard money loan.

Why Hard Money Loans Are the Best Bridge Solution

When a traditional lender offers you a bridge loan, they lend by unlocking the equity in your existing home. Hard money lenders do exactly that but make the process simpler because they operate in a less bureaucratic environment. These lenders use private capital to offer short-term mortgage products in scenarios where getting a bank loan would be difficult or inefficient, such as:

The eligibility requirements for hard money loans revolve around the quality of the collateral. There is less scrutiny around your creditworthiness, which automatically leads to less paperwork and fewer calls.

Source: Ralph (Ravi) Kayden

Hard money lenders typically charge an interest rate of around 8%–14% for bridging, so they cost you about the same as a Compass-sponsored bridge. Keep in mind that the lending guidelines vary in every state. As a borrower, you should run through different bridging options available in your area—evaluate them in terms of aspects like closing fees, penalty provisions, and interest rates to ensure you get a cost-efficient deal.

Hard Money Loan Solutions (HMLS)—Your Fastest Route to Bridge Financing

Hard Money Loan Solutions (HMLS) is a Florida-based private lender providing top-tier bridging services to anyone with enough equity in their home. Bridging while changing homes is a simple transaction rooted in common sense, and it ideally shouldn’t be stressful to handle at all. At HMLS, a team of veteran lenders works with you to make your experience smooth and hassle-free. You can use HMLS bridge loans for:

Besides bridge loans, HMLS also offers special packages for various projects like renovation, business acquisition, short sale, investment, and new construction. Apply for a loan and get a free consultation from a hard money expert about your funding package.

Source: Google Reviews

HMLS has earned a 5-star rating on Google Service Reviews because the group prioritizes customers’ needs. The lenders strive to figure out mutually beneficial solutions even in scenarios where a traditional vendor would refuse to lend. You can secure an HMLS loan regardless of your credit, debt, or nationality status. Other quality service aspects include:

  • Transparency—The HMLS team uses robust property analysis techniques to decide whether they want to service a deal or not. They communicate decisions swiftly and are happy to answer any questions about the product, cost, or process
  • Funding promise—Many private bridge lenders leave you hanging at the last minute. At HMLS, an approved deal is sure to be serviced
  • Speed—HMLS lenders move with speed, funding deals within 3–14 days. The processing here is faster because of light documentation requirements

Prominent Features of an HMLS Bridge Loan

It’s essential to do a cost-benefit analysis before you go for an HMLS bridge loan—or any mortgage product, for that matter. Here is the typical outline of the lending parameters at HMLS:

ComponentsHMLS Package
Interest rate9.99% to 12%
Rate typeFixed
Principal$100,000 to $50,000,000+
Term1–3 years
Installment typeInterest only (no amortization)
Loan-to-value (LTV) offeredUp to 70% of the purchase price of the new home or the appraised value of the old home (whichever is lower)
Funding time3–14 days
Origination fee2 points or 2% of the principal sum
Prepayment penaltyNo penalty if repaid after 6 months
Down payment depositNot required

Know that every HMLS product is tailored to complement a borrower’s requirements and repayment strategy. For example, if you want a low-LTV loan to pay the down payment on your new home, you’d qualify for a low interest rate.

While HMLS asks for interest-only installments, you’d still have two mortgages to pay if you have an outstanding balance on your existing home. You can choose an HMLS refinance or cash-out refinance plan if you want to streamline the payments, provided it benefits you.

Source: krakenimages

How To Get and Use an HMLS Bridge Loan

With HMLS, you don’t have to juggle multiple agents and lenders—most borrowers talk to a lender directly and are in full control of how the funding proceeds. Here is how you get an HMLS bridge loan:

  1. Open the HMLS online loan application form
  2. Enter your basic contact details
  3. Provide information about your collateral or purchase property
  4. Specify the loan amount you seek
  5. Add any other comments for the review team
  6. Submit the form

An HMLS lender will reach out to you via phone to discuss the deal. They will complete the basic borrower and property due diligence process, and if the risk makes sense to them, they will approve your application and start the legal exercise for funding. If your deal is too risky for HMLS, though, the team may guide you toward other available options.

There are occasions when the bridging period is nearing its end, and the property still hasn’t been sold. Don’t get too stressed in such cases, but inform your lender to discuss alternative repayment terms. Get in touch with HMLS for top advice customized to your situation.

Other Useful Resources

If you need information about specific lenders, check out our reviews of:

Featured image source: RODNAE Productions

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