What is a Bridge Loan? Short-Term Financing for Homebuyers

Buying a new home before you’ve sold your current one can feel like a financial juggling act. You’ve found your dream home, but your current house is still on the market. What do you do? Enter the bridge loan — a financial tool that can help you navigate this tricky transition period with confidence.

If you’re wondering what a bridge loan is and whether it’s right for your situation, you’re in the right place. Let’s explore how this short-term financing option works and when it might be the perfect solution for your home-buying journey.

What is a bridge loan?

A bridge loan is a short-term financing option that helps homeowners “bridge” the gap between buying a new home and selling their existing property. Think of it as a financial stepping stone that provides temporary funding when you need to make a down payment on a new house before your current home sells.

These loans are specifically designed for situations where timing doesn’t quite line up. Instead of waiting months for your home to sell or missing out on your ideal property, a bridge loan gives you the financial flexibility to move forward with both transactions simultaneously.

Why would I choose to take out a bridge loan?

Bridge loans become particularly valuable in several scenarios. You might need one when:

• You’ve found the perfect home but haven’t received an offer on your current property yet. 
• You need to close quickly on a competitive property and can’t wait for your existing home to sell. 
• You’re dealing with a hot housing market where sellers expect non-contingent offers, and a bridge loan can give you that competitive edge.

Characteristics of bridge loans

Understanding the key features of bridge loans helps you determine if this financing option aligns with your needs.

Purpose: Immediate liquidity when buying and selling house at the same time

The primary purpose of a bridge loan is to provide immediate liquidity for a down payment on a new home while you’re still marketing your current property. This allows you to act quickly on real estate opportunities without the financial strain of carrying two mortgages from your own funds.

Duration: 6 months to 1 year repayment

Bridge loans are intentionally short-term, typically lasting between 6 months to one year. Some lenders may offer extensions, but the expectation is that you’ll repay the loan relatively quickly once your existing home sells. This short timeframe is why they’re called “bridge” loans — they’re meant to carry you over a temporary gap, not serve as long-term financing.

Repayment terms: Varies but borrowers typically pay off entire loan with proceeds from home sale

Repayment structures vary by lender and your specific situation. Some bridge loans require monthly interest-only payments until your current home sells, at which point you pay off the principal in full. Other lenders might allow you to defer all payments until the loan term ends, though this typically means higher overall costs. The most common scenario involves paying off the entire bridge loan with proceeds from the sale of your existing home.

Interest rates: 8% – 12%

Because bridge loans carry more risk for lenders, they typically come with higher interest rates than traditional mortgages. You can expect rates that are 2-3 percentage points higher than conventional mortgage rates, sometimes ranging from 8% to 12% or more, depending on market conditions and your financial profile. The premium reflects the temporary nature of the loan and the uncertainty surrounding when your property will sell.

Collateral: Usually the home you are selling

Bridge loans are secured loans, meaning they require collateral. In most cases, your current home serves as collateral for the bridge loan. Some lenders might use both your existing property and the new home you’re purchasing as collateral, creating what’s known as a “cross-collateralized” loan. This security reduces the lender’s risk but means you could lose one or both properties if you default on the loan.

How does a bridge loan work?

The mechanics of a bridge loan are straightforward once you understand the process. Here’s how it typically unfolds:

1. First, you apply for a bridge loan with a lender, who evaluates your current home’s value and your ability to repay the loan. 
2. Once approved, the lender provides funds based on the equity in your existing home, usually up to 80% of its value, minus what you still owe on your current mortgage.
3. You then use these funds as a down payment on your new home. During the bridge loan period, you might make interest-only payments, or in some cases, no payments at all until your original home sells. 
4. Once your existing property closes, you use the proceeds to pay off the bridge loan in full. Any remaining money becomes your equity in the new home.

Let’s look at an example: Suppose your current home is worth $400,000, and you owe $200,000 on your mortgage. A bridge loan could provide up to 80% of your home’s value ($320,000) minus your existing mortgage ($200,000), giving you access to $120,000 for your new home purchase.

Bridge loan vs traditional loan

While both bridge loans and traditional mortgages help you purchase property, they serve different purposes and have distinct characteristics.

*As of December 2025. Source: Rocket Mortgage

A traditional mortgage is a long-term loan, typically spanning 15 years or 30 years, with fixed or adjustable interest rates that are generally lower than bridge loan rates. You make regular monthly payments that include both principal and interest, and the qualification process, while thorough, is standardized and relatively predictable.

Bridge loans, by contrast, are short-term solutions lasting less than a year. They carry higher interest rates and often require interest-only payments or no payments until the loan matures. The approval process can be faster but more stringent, as lenders carefully assess your ability to manage multiple properties and repay the loan quickly.

The key difference lies in their purpose: Traditional mortgages are for buying and holding property long-term, while bridge loans specifically address temporary cash flow challenges during a transition period.

Bridge loan mortgage requirements

Securing a bridge loan requires meeting specific criteria that demonstrate your ability to handle the financial responsibility. Lenders want assurance that you can manage two properties simultaneously and repay the loan promptly.

• Most lenders require substantial equity in your current home, typically at least 20% but often preferring 30% or more. 
• Your credit score should be strong — generally 680 or higher, though many lenders prefer scores above 700. 
• You’ll also need to demonstrate sufficient income to cover payments on both your existing mortgage and your new home loan, plus the bridge loan if payments are required.
• Lenders will examine your debt-to-income ratio closely.
• You’ll need to provide documentation, including recent pay stubs, tax returns, bank statements, and information about your current home’s value and expected sale price.

How to qualify

Qualifying for a bridge loan involves demonstrating financial stability and a solid exit strategy. Here’s what strengthens your application:

Start by ensuring your current home is market-ready or already listed with a realistic asking price. Lenders feel more confident when they see you’re actively working toward selling your property. 

• Having substantial equity in your existing home is crucial — the more equity you have, the less risky you appear to lenders.
• Maintain a strong credit profile with no recent late payments or financial issues.
• Demonstrate stable, verifiable income that can comfortably cover all housing expenses during the transition period.
• Some lenders may also require cash reserves equal to several months of combined mortgage payments as a safety net.
• Working with an experienced real estate agent and getting a professional appraisal of your current home can strengthen your application by showing lenders you have a realistic timeline and sale price in mind.

When might you want to get a bridge loan?

Bridge loans shine in specific situations where timing and opportunity intersect. Let’s explore the most common scenarios where this financing option makes excellent sense.

Buying a new home before selling your old one

This is the classic bridge loan scenario. You’ve found a home that checks all your boxes, but your current property hasn’t sold yet. 

Rather than risk losing your dream home or scrambling to rent temporary housing, a bridge loan provides the financial flexibility to move forward with confidence. This is particularly valuable when you’re relocating for work, need to be in a specific school district by a certain date, or simply can’t wait indefinitely for the right buyer.

Buying an investment property

Real estate investors often use bridge loans to seize time-sensitive opportunities. When you spot an undervalued property or a motivated seller willing to close quickly, a bridge loan can provide the capital you need while your other assets remain invested. This allows you to expand your portfolio without liquidating existing holdings or missing out on lucrative deals.

Removing contingencies from the equation in a competitive market

In hot real estate markets, sellers often receive multiple offers and favor those without contingencies. A contingency that requires the buyer to sell their current home first can make your offer less attractive. 

With a bridge loan, you can remove that sale contingency, making your offer as appealing as those from buyers with immediate cash or financing. This positions you as a serious, financially capable buyer.

Increased leverage in competitive housing markets

Beyond removing contingencies, bridge loans provide negotiating power in bidding wars. When you can make a strong, non-contingent offer with proof of financing already in place, you stand out from the competition. 

Sellers appreciate the certainty and speed that comes with buyers who don’t need to wait for another property to sell. In markets where homes receive multiple offers within days, this advantage can be the difference between securing your ideal home and watching it go to someone else.

What to consider before getting a bridge loan

While bridge loans offer valuable flexibility, they’re not the right choice for everyone. Consider these important factors before committing.

Upfront expenses

• Bridge loans come with significant costs that extend beyond interest rates. Expect to pay origination fees, typically 1-2% of the loan amount, plus appraisal fees for your current home, title insurance costs, and potential attorney fees. Some lenders also charge administration fees and processing costs. These expenses can easily reach several thousand dollars, eating into your home equity before you’ve even moved.
• You’ll also need to consider the costs of maintaining two properties simultaneously, including utilities, insurance, taxes, and maintenance for your current home while you’re already settled into your new one.

Potential risks

• The primary risk with a bridge loan is that your current home might take longer to sell than anticipated. If the housing market shifts or your property sits unsold for months, you’ll face mounting financial pressure from carrying two mortgages plus the bridge loan payment.
• There’s also the risk of receiving less for your current home than expected. If you’re forced to drop your asking price significantly to attract buyers, the proceeds might not fully cover the bridge loan, leaving you to make up the difference from other funds.
• Additionally, if you default on a bridge loan, you could face foreclosure on one or both properties, depending on how the loan is structured. This makes bridge loans particularly risky during uncertain economic times or in cooling real estate markets.
• Market timing is another consideration. Taking out a bridge loan during a strong seller’s market might work beautifully, but if conditions deteriorate before your home sells, you could find yourself in a difficult position.

Pros of bridge loans

Despite the costs and risks, bridge loans offer several compelling advantages for the right borrower:

• Flexibility and convenience: Bridge loans eliminate the stress of coordinating closing dates perfectly or finding temporary housing between homes. You can move directly from your old home to your new one on your own timeline.
• Competitive advantage: Removing sale contingencies makes your offer significantly more attractive to sellers, especially in hot markets. You can compete with cash buyers and other well-qualified purchasers.
• Quick access to funds: Bridge loans typically close faster than traditional mortgages, often within a few weeks. When you need to act quickly on a property, this speed is invaluable.
• Avoid double moves: Without a bridge loan, you might need to move out of your current home, store your belongings, live in temporary housing, and then move again into your new home. Bridge loans eliminate this hassle and expense.
• Leverage your equity immediately: Rather than waiting months to access the equity in your current home, a bridge loan converts that equity into usable funds right away, allowing you to capitalize on opportunities as they arise.

Cons of bridge loans

Being realistic about the drawbacks helps you make an informed decision:

• Higher costs: Between elevated interest rates, origination fees, and other closing costs, bridge loans are expensive. You’ll pay significantly more than you would with traditional financing alone.
• Short repayment timeline pressure: The clock starts ticking immediately, and if your home doesn’t sell within the loan term, you might face balloon payments you’re not prepared to make or need to negotiate an extension with additional fees.
• Risk of carrying multiple properties: Managing mortgage payments, insurance, taxes, and maintenance on two homes simultaneously creates substantial financial strain. If unexpected expenses arise or your income changes, this burden can become overwhelming.
• Strict qualification requirements: Not everyone can qualify for a bridge loan. The combination of strong credit, substantial equity, and proven income capacity excludes many homeowners who might otherwise benefit from this option.
• Potential for negative equity situations: If property values decline during your transition period, you could end up owing more than one or both homes are worth, creating a complicated financial situation.

Bridge loan alternatives

If a bridge loan seems too risky or expensive for your situation, several alternatives might serve your needs better.

Home equity loan

A home equity loan provides a lump sum of money borrowed against the equity in your current home, with fixed interest rates and predictable monthly payments over a set term, usually 5 to 15 years. This option typically offers lower interest rates than bridge loans and more manageable repayment terms.

The downside is that you’re adding another monthly payment to your obligations, and if your home doesn’t sell as expected, you’ll be managing this payment along with your new mortgage and existing mortgage.

HELOC

A Home Equity Line of Credit works like a credit card secured by your home’s equity. You can borrow up to your credit limit as needed, pay interest only on what you use, and enjoy flexibility in how you access and repay funds. HELOCs often have lower interest rates than bridge loans during the initial draw period.

However, many HELOCs have variable interest rates that can increase over time, and like home equity loans, they add another financial obligation to your plate. Some lenders also restrict HELOCs when your home is actively listed for sale.

Personal loan

For smaller gap amounts, a personal loan might provide the funds you need without putting your home up as collateral. These unsecured loans can close quickly and don’t involve complex real estate transactions.

However, personal loans typically come with higher interest rates than secured options, lower borrowing limits that might not meet your needs, and shorter repayment terms. They work best when you need a relatively small amount of money to bridge a gap.

Cash-out refinance

If you have substantial equity in your current home and interest rates are favorable, you might refinance your existing mortgage for more than you owe and pocket the difference. This gives you cash for a down payment while potentially lowering your current mortgage payment if rates have dropped.

The drawback is that refinancing takes time — usually 30 to 45 days — which might not work if you need to close quickly. You’ll also pay closing costs on the refinance, and you’re increasing your loan balance on a property you’re planning to sell.

Pledge asset mortgage

Some lenders offer programs where you can pledge investment accounts, retirement funds, or other assets as collateral for your new home purchase instead of making a traditional down payment. This allows you to maintain your investment positions while accessing the buying power they represent.

These specialized programs typically require substantial assets, excellent credit, and relationships with specific financial institutions. They’re not widely available but can be excellent solutions for high-net-worth individuals.

Bridge loans have benefits and drawbacks

Bridge loans are powerful financial tools that can transform a stressful home-buying situation into a manageable transition. They provide the flexibility to move forward with purchasing your dream home without waiting for your current property to sell, and they give you competitive advantages in hot markets.

However, they come with real costs and risks that shouldn’t be minimized. The higher interest rates, upfront expenses, and pressure of needing your home to sell within a specific timeframe make bridge loans unsuitable for everyone.

The key is honest self-assessment. Do you have enough equity? Is your current home priced realistically and likely to sell relatively quickly? Can you handle the financial pressure of multiple properties if something goes wrong? Do you have a backup plan if your home sits on the market longer than expected?

For financially strong borrowers with in-demand properties in stable or hot markets, bridge loans can be exactly the right solution. They offer a clear path forward when timing doesn’t quite line up. For others, exploring alternatives like HELOCs, home equity loans, or other creative financing solutions might provide the funds you need with less risk.

Whatever you decide, work closely with experienced real estate and financial professionals who can help you evaluate your specific situation and determine the best path forward for your unique circumstances.

Frequently asked questions about bridge loans

What credit score do I need for a bridge loan?

Most lenders require a credit score of at least 680, though many prefer 700 or higher. The higher your score, the better your chances of approval and the more favorable your terms might be.

How much can I borrow with a bridge loan?

Typically, you can borrow up to 80% of your current home’s value, minus what you still owe on your existing mortgage. Some lenders offer higher loan-to-value ratios for exceptionally qualified borrowers.

What happens if my house doesn’t sell before the bridge loan is due?

If your home hasn’t sold by the time your bridge loan term ends, you’ll need to either repay the loan from other funds, negotiate an extension with your lender (which usually involves additional fees), or potentially face default and foreclosure proceedings.

Can I get a bridge loan if my house isn’t listed yet?

Some lenders require your home to be actively listed before approving a bridge loan, while others may approve the loan if you have a concrete plan and timeline for listing. Requirements vary by lender.

Are bridge loans tax-deductible?

The interest you pay on a bridge loan may be tax-deductible if the loan is secured by your home and the proceeds are used to buy, build, or substantially improve a primary or secondary residence. However, tax laws are complex and change over time, so consult with a tax professional about your specific situation.

How long does it take to get approved for a bridge loan?

Bridge loans typically close faster than traditional mortgages, often within 2 to 4 weeks. Some lenders can move even more quickly for well-qualified borrowers with straightforward situations.

Can I get a bridge loan for an investment property?

Yes, many lenders offer bridge loans for investment properties, though the terms might differ from those for primary residences. Expect more stringent qualification requirements and potentially higher interest rates.

What’s the difference between a bridge loan and a swing loan?

These terms are often used interchangeably. Both refer to short-term financing that helps you “swing” or “bridge” from one property to another. Some regions or lenders may prefer one term over the other, but they describe the same basic concept.

Do all lenders offer bridge loans?

No, not all mortgage lenders offer bridge loans. They’re specialty products typically available through banks, credit unions, and private lenders. You may need to shop around to find a lender with favorable terms for your situation.

Can I make an offer contingent on getting a bridge loan?

While you can structure your offer this way, it somewhat defeats the purpose of using a bridge loan, which is to make a non-contingent offer. Most buyers who use bridge loans get pre-approved before making offers, allowing them to present themselves as non-contingent buyers.

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