A bridge loan is short-term financing that “bridges” the gap between two transactions - most commonly, buying a new property before an existing one has sold. It gives borrowers access to equity in their current home to fund a purchase without waiting for that sale to close first.
The loan is secured by the borrower’s current property, using available equity as collateral.
Loan proceeds may be used toward the down payment or purchase of the new property.
Bridge loans typically have terms of 6 to 12 months and are designed to be repaid once the original property sells.
Repayment typically comes from the sale proceeds of the original property. Depending on the loan program, an extension or longer-term financing may also be available if the property does not sell within the expected timeframe.
✓Homeowners who find their next property before selling their current one.
✓Buyers in competitive markets who need to make a non-contingent offer.
✓Investors repositioning between properties without waiting for an existing property to sell.
✓Sellers who need move-out flexibility without rushing the sale of their current property.
Answers to common questions about bridge financing.
Most bridge loans run 6 to 12 months, generally matching the expected timeline to sell the departing property. Terms vary by lender and loan program.
No. That’s one of the primary purposes of a bridge loan. It can allow you to purchase your next property before your current property sells, using the existing property’s equity as collateral, subject to lender qualification requirements.
Bridge loans generally carry higher rates and fees than conventional financing because of their shorter terms, specialized structure, and faster access to funds. The overall cost depends on the lender, loan amount, property, and borrower’s qualifications.
Options vary by lender and loan program. Depending on the circumstances, an extension or longer-term financing may be available. Borrowers should discuss potential options with their lender before closing so they understand the available alternatives if the property takes longer to sell.
Bridge loan eligibility, rates, terms, fees, and repayment options vary by lender, property, loan program, and borrower qualifications. Borrowers should review the specific terms of their loan and consult with their lending professional regarding their individual circumstances.
