🔑 What is a Bridge Loan?

A bridge loan is a short-term loan that helps a homeowner "bridge" the gap between buying a new home and selling their current one. It gives temporary financing so the buyer doesn’t have to wait for the sale proceeds of their existing property to purchase a new property.

⚙️ How They Work

  • Usually secured by the home you’re selling (or both the departing residence and the new property).
  • Provides funds for the down payment on the new home before the old one sells.
  • Typically have higher interest rates and fees compared to traditional mortgages.
  • Designed to be repaid when the old home is sold (often 2–12 months).

âś… Key Features

  • Short-Term: Usually 2–12 months (sometimes up to 24).
  • Collateral: Secured by your existing home, the new property, or both.
  • Payments: Some lenders allow interest-only payments until your old home sells.
  • Speed: Can close faster than traditional long-term financing.

💡 When They’re Useful

  • Buying a new home before selling your current one.
  • Needing down payment funds quickly without waiting for your sale to close.
  • In competitive markets where sellers want non-contingent offers (not dependent on your old home selling).

đź“Š Typical Structure

  1. Payoff & Equity Loan
    • The lender pays off your existing mortgage and/or gives you access to equity to use as a down payment on the new home.
  2. Second Loan Against Equity
    • You keep your current mortgage and just borrow against the equity for the down payment.

⚠️ Things to Consider

  • Higher Interest Rates (usually above conventional mortgage rates).
  • Closing Costs & Fees are higher since it’s short-term.
  • Risk: If your home doesn’t sell quickly, you could be stuck with two mortgage payments plus the bridge loan interest.