Bridge Loans, Tax Savings & Recasting: A Smarter Path to Your Next Home

  • Tags: Calculators, New Construction, Spec Homes

Are you selling your current home and planning to buy another? If so, you may be wondering how to unlock your equity before closing, reduce your future mortgage payment, and potentially save tens of thousands in taxes.

That’s exactly what our Bridge Loan, Capital Gains Exclusion, and Mortgage Recast Calculator was designed to help you do.

Let’s walk through the strategy, the savings, and how it all works together to build long-term wealth.

Bridge Loans: Leverage Your Current Equity, Even Before You Sell

One of the biggest challenges in today’s market is timing. You find your dream home, but your current one hasn’t sold yet. A bridge loan solves that.

By allowing you to borrow against the equity in your existing home before it closes, a bridge loan gives you:

  • A competitive edge with a stronger, non-contingent offer
  • A way to cover your new down payment without liquidating investments
  • Flexibility to move on your timeline instead of the market’s

For primary residences, you can access up to 80% of your equity. For investment properties or second homes, it’s up to 75%.

Sample Deal Breakdown

Let’s say you already own a property purchased years ago for $500,000.

You estimate:

  • $1,000,000 in hard construction costs
  • $50,000 in soft costs (permits, architects, etc.)
  • A $1,050,000 construction loan
  • Sales price (ARV) of $3,700,000
  • 12-month build time

You’re splitting the deal with four other partners

Here’s what your calculator result might look like:

  • Total project cost: $3,178,835
  • Cash out of pocket: $354,725
  • Estimated profit before tax or exchange: $521,165
  • Profit per partner (5 total): $104,233
  • Cash-on-cash ROI: 146.9%
  • Monthly qualifying income: $42,405

This is with no payments due during construction—interest is prepaid.

Capital Gains Exclusion: Save up to $500,000 in Taxes

If you’ve lived in your home for at least two of the last five years, the IRS allows you to exclude capital gains on your sale—up to $250,000 if you file individually or $500,000 if you file jointly.

This tax savings isn’t just a short-term win. When reinvested, it can significantly impact your long-term net worth. In our sample scenario, the capital gains savings came to over $40,000. At just 3% annual growth, that can turn into nearly $100,000 over 30 years.

It’s not just about what you save—it’s about what you do with the savings.

Mortgage Recasting: Lower Your Future Monthly Payment Without Refinancing

A recast allows you to apply any leftover equity after closing to reduce your principal balance—without changing your loan’s interest rate or term.

Unlike a refinance, which requires a full loan application, appraisal, and closing costs, a recast is a simple one-time payment directly to your mortgage servicer.

This strategy can drop your monthly payment significantly. In our example, recasting lowered the monthly principal and interest by over $250—a total savings of more than $90,000 over the life of the loan.

Real-World Example: How the Numbers Stack Up

Let’s say:

  • You sell your home for $500,000 with a $200,000 mortgage balance
  • You buy a new home for $800,000
  • You want to keep 20% of your equity for other uses
  • Your estimated capital gains exclusion savings is $40,013

Here’s how the calculator breaks it down:

  • Bridge loan equity available: $266,750
  • Initial down payment toward new home: $175,000
  • Initial loan amount: $625,000
  • Estimated monthly payment before recast: $4,771
  • Estimated monthly payment after recast: $4,515
  • Final loan amount after applying remaining equity: $586,600
  • 30-year growth of capital gains tax savings reinvested: $97,121

This strategy offers a powerful way to move homes without financial strain, while building future wealth in the process.

Turn Your Tax Savings Into Investment Property Wealth

What happens if you reinvest the capital gains tax savings into a rental property?

Let’s assume you put $40,000 down on a $200,000 rental. Over time, with 3% annual appreciation:

  • The home could grow to $311,000 in 15 years
  • Or to $485,000 in 30 years
  • And your tenants help pay down the mortgage in the meantime

This is how savvy homeowners turn tax savings into long-term wealth.

Take the First Step Toward Smarter Financing

Our calculator helps you estimate:

  • Your bridge loan equity
  • Your cash-to-close and monthly payment
  • Your capital gains tax savings
  • And your recast-adjusted future payment

Once you see your numbers clearly, you can take action with confidence.

Talk to a licensed loan officer today and discover how to use your equity, maximize your tax savings, and structure a mortgage that truly fits your life.

Get Preapproved Now. Start Planning Your Wealth Journey.

Ready to Take Your First Step?

Skip the guesswork. Take our quick Discovery Quiz to uncover your top financial priorities, so we can guide you toward the wealth-building strategies that fit your life.

  • 💡 Takes just 5 minutes
  • 📊 Tailored results based on your answers
  • 🔒 No credit check required
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Buying a home soon? Complete our short form and we’ll connect you with the best loan options for your target property and financial situation—fast.

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Let’s talk it through. Book a call and one of our friendly advisors will be in touch to guide you personally.

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Important Disclaimer

This calculator is for illustrative purposes only and does not constitute financial, legal, or investment advice. Results are based on general assumptions and may not reflect actual performance or eligibility. This is not a loan estimate or approval. Please consult with a licensed mortgage advisor before making financial decisions.

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