A bridge loan is short-term, secured bridge financing that “bridges” the gap between buying a new property and selling an existing one—usually a high-cost, interest-bearing loan secured by one or both homes and repaid when the seller’s home closes or permanent financing is arranged.
Buyers use bridge loans to make non-contingent offers in competitive markets, move before their current home sells, or finance a down payment. Investors and flippers use them to close quickly on time-sensitive deals, renovate, then sell or refinance into longer-term debt.
Bridge loans are commonly secured by the seller’s current home (the asset being sold), the new property (the purchase), or both. The collateral depends on the lender and structure—don’t assume the new house is always the security; many lenders rely primarily on the existing home’s equity.
Most bridge loans are closed as a separate short-term loan (often a second mortgage) secured by your current home’s equity. Some lenders may put a lien on the new purchase, especially if the bridge funds are used for the down payment. The loan is intended to be repaid from sale proceeds or converted into longer-term financing.
Common term lengths run 30–180 days; many lenders extend up to 12 months. Repayment triggers include: sale of the current home, refinancing into a conventional mortgage, or a scheduled maturity requiring payoff. Extensions are possible but often costly.
Payment options vary: interest-only monthly payments, rolled interest (added to the loan balance and repaid at sale), or full principal + interest required monthly. Clarify with the lender whether interest accrues and compounds.
Typical timeline: lender pre-approval (1–3 days), appraisal & underwriting (3–10 business days), bridge loan closing (same day as purchase or before), buyer moves in. Repayment happens at the sale closing of the old home (often 30–90 days later). If the home hasn’t sold, you may pay interest or trigger an extension.
Bridge loan rates are higher than conventional mortgage rates—often in the range of prime + 1–4% or a flat rate of roughly 6–12% depending on market conditions, borrower credit, and LTV. Lenders price the risk of short-term repayment uncertainty and the cost of quick funding.
Expect origination fees (1–3% of loan amount), standard closing costs (appraisal, title, recording), and potential extension or prepayment fees. Some lenders charge higher administrative fees for fast turnarounds.
Lenders assess LTV on the collateral property and often use a combined LTV (CLTV) that includes existing mortgage balances plus the bridge loan compared to property value. Typical max CLTVs for bridge loans are 70–80% depending on lender risk tolerance.
Sample: current home market value $600,000; outstanding mortgage $200,000 => available equity $400,000. Lender allows 75% CLTV: 75% of $600,000 = $450,000 max total liens. Max bridge loan = $450,000 − $200,000 = $250,000.
If borrower takes $200,000 bridge at 8% interest, interest-only monthly = $200,000 × 0.08 / 12 = $1,333. Origination fee 2% = $4,000 paid at closing (or rolled). If interest is rolled, payoff after 6 months = $200,000 + (1,333 × 6) = $208,000.
Many bridge lenders want credit scores above 620–680 (higher for best rates). Debt-to-income (DTI) expectations vary; some lenders focus more on equity and property value than DTI, but typical acceptable DTI is under 45–50%.
Lenders generally require substantial equity—often 20–30% after accounting for existing liens. Some lenders require seasoning of existing mortgage (e.g., at least 6 months since origination) and will check lien priority; second-position bridge loans may have stricter caps.
Expect pay stubs, tax returns, bank statements, existing mortgage statements, a sales contract for the current home (if listed/pending), and an appraisal or broker price opinion for both properties. Quick lenders may accept desktop valuations for speed.
Bridge loans can fund in days to a few weeks. Fast-turn lenders (specialty bridge lenders or credit unions) can close within 3–7 days if documentation is ready; traditional banks may take longer (2–3 weeks).
HELOCs typically have lower rates and are cheaper long-term but require an open credit line and take longer to set up. HELOCs are ideal if you plan to repay over time; bridge loans are faster to fund and designed specifically for short-term sale-dependent needs. See also our HELOC guide.
A second mortgage or piggyback is a longer-term structure that may have lower rates but is less flexible for last-minute transactions. Bridge loans are short-term and optimized for timing gaps rather than permanent financing.
Hard-money loans are asset-based, higher-rate loans geared toward flippers and investors for acquisition and rehab. Bridge loans for investors can be similar but are usually cleaner for homeowners moving between residences. See hard-money loans.
Contingent offers depend on sale of current home and are less competitive. Rent-backs allow buyers to close and let sellers stay temporarily but require seller agreement. Seller financing avoids bridge costs but is rare. Choose based on cost, speed, and seller willingness.
If it doesn’t sell, you may need to: refinance into longer-term debt, extend the bridge (with added fees), sell at a lower price, or carry the loan and two mortgages longer—each option has costs.
Build a buffer: calculate worst-case monthly payments for both mortgages plus bridge interest, and ensure you have savings (3–6 months) or liquidity to cover that span. Negotiate interest-only payments when possible.
Ask lenders about extension fees and maximum extension terms. Line up fallback options—HELOC, personal line of credit, or a larger mortgage—before closing. Consider temporary rent-back agreements to manage timing.
Maintain homeowner’s insurance and check that lender-required appraisals reflect realistic market values. Review loan agreements for default clauses, prepayment penalties, and lien positions with a real estate attorney if needed.
Prepare pay stubs (30–60 days), recent tax returns, bank statements, current mortgage statements, listing agreement/sales contract for current home, and ID.
With everything ready, specialist bridge lenders can close in 3–7 business days. Banks may take 10–21 days. Speed depends on appraisal and title work.
Banks and credit unions may offer conservative terms; specialty bridge lenders and mortgage brokers can be faster and more flexible. Compare offers from at least 3 lenders.
Negotiate on origination fees, ask for reduced extension fees, and request interest-only options. Compare APR (includes fees) and total cost for expected loan duration.
Brokers can shop multiple lenders quickly but may add broker fees. Direct lenders may be cheaper but shop fewer options. For speed, specialty direct lenders often win.
Request each lender to quote: loan amount, rate, origination fee, appraisal fee, CLTV, payment structure, extension fee, and expected funding timeline. Put quotes side-by-side to compare APR and worst-case cost.
Anna found a new home for $850,000 but her current house hadn’t sold. She needed a $150,000 down payment. She had $300,000 equity in her current home (market value $700,000; mortgage $400,000).
Loan structure: Anna took a $150,000 bridge loan secured by her current home at 7.5% interest, 6-month term, interest-only. Origination fee 1.5% ($2,250). Monthly interest = $150,000 × 0.075 / 12 = $937.50.
Scenario timeline: Day 0—bridge approved and funded for deposit/down payment; Day 7—close on new home; Day 60—current home goes under contract; Day 90—sale closes and bridge repaid. Total interest paid for 3 months = $937.50 × 3 = $2,812.50; total cost including origination = $5,062.50.
What went right: Anna secured the new house in a competitive bid by offering no sale contingency. Her listing sold quickly, keeping bridge duration short and costs reasonable.
Risks: If her home hadn’t sold, Anna would have needed to pay bridge interest longer or refinance. She mitigated risk by setting a conservative asking price and lining up a strong agent and contingency marketing plan to reduce time on market.
Bridge financing solved timing mismatch and preserved buying leverage. Watch for interest accrual, extension costs, and ensure you can carry two mortgages temporarily or have fallback financing.
Typical terms are 1–12 months, commonly 30–180 days. Extensions are possible but costly.
Yes—many borrowers carry both for a short period. Ensure you can afford combined payments or negotiate interest-only bridge payments.
It can be secured by either or both. Confirm lien position and collateral with your lender—often the current home is primary security.
Many are interest-only, but payment structures vary. Ask for exact payment terms and whether interest is rolled into the balance.
Tax treatment depends on use of funds and current tax law (e.g., whether funds are used to buy a primary residence). Consult a tax advisor for your situation.
Options: extend the bridge (with fees), refinance, sell at a lower price, or carry payments longer. Plan a fallback before signing.
Yes. Investors use bridge or hard-money loans to close quickly, renovate, and sell or refinance into rental mortgages. Terms differ for investor vs. owner-occupant loans.
Buyer used a 6-month bridge to make a cash-like offer and won the home; bridge was repaid after a 45-day sale of the current house.
Investor closed on a below-market property with bridge funds, rehabbed in 4 months, sold at a profit and repaid loan plus rehab costs.
One homeowner carried the bridge for 11 months due to a slow market, paid significant interest and extension fees, and ultimately accepted a lower sale price. Lessons: conservative timelines, reserve funds, and backup financing are critical.
If you lack equity, market outlook is weak, or you can wait: use a HELOC, sell first and rent, use contingent offers, or pursue seller financing instead.
Run worst-case cashflow models, confirm CLTV and extension fees, and get written estimates from multiple lenders before committing.
A bridge loan is short-term bridge financing that helps buyers and investors cover timing gaps between purchase and sale. It’s fast and flexible but pricier and sale-dependent—use it when equity, market conditions, and contingency plans align.
Related: HELOC | mortgage basics | hard-money loans
Include an interactive bridge loan monthly-cost calculator, a printable bridge loan checklist, and links to the HELOC and mortgage basics pages for alternatives.
