Buying and selling a home don’t always happen at the same time. Sometimes, you find your dream property before your current home sells—or you need quick financing to cover a gap in timing. That’s where a bridge loan comes in.
In this guide, we’ll break down what bridge loans are, how they work, and when it makes sense to use one.
What Is a Bridge Loan?
A bridge loan is a short-term loan that helps you “bridge” the gap between buying a new property and selling your existing one.
Typically lasting from 6 months to 3 years, bridge loans are designed to provide temporary financing until long-term funding (such as a traditional mortgage) is secured or your current property is sold.
How Do Bridge Loans Work?
Here’s how it usually plays out:
- You’re ready to buy a new home but haven’t sold your current one yet.
- A lender provides a bridge loan secured by your existing property.
- You use the loan to cover the down payment or purchase of your new home.
- Once your old home sells, you pay off the bridge loan with the proceeds.
Common Uses of Bridge Loans
- Buying before selling: If you’ve found the perfect home but your current property hasn’t sold.
- Avoiding contingent offers: Sellers often prefer buyers without “home sale contingencies.” A bridge loan makes your offer more competitive.
- Covering cash flow needs: Provides temporary liquidity for closing costs or renovations before permanent financing kicks in.
Pros of Bridge Loans
✔ Fast access to cash – Quicker than traditional loans, often closing in a matter of days.
✔ Flexibility – Helps you buy your next home without rushing to sell your current one.
✔ Stronger offers – Allows you to bid on homes without contingent financing.
Cons of Bridge Loans
✘ Higher interest rates – Bridge loans usually carry higher rates than conventional mortgages.
✘ Short terms – You need to sell your home or refinance quickly.
✘ Fees and closing costs – Origination fees, appraisal fees, and other costs can add up.
✘ Risk if your home doesn’t sell – You could be stuck paying two loans at once.
When Should You Consider a Bridge Loan?
A bridge loan may be worth it if:
- You’ve found a new home you love and don’t want to lose it.
- You can comfortably manage short-term loan payments.
- You’re confident your current property will sell quickly.
- You want to avoid the stress of juggling contingent offers.
It might not be the best choice if:
- Your home is in a slow market where selling could take months.
- You’re already stretching your budget.
- You don’t want to take on additional fees and interest costs.
Alternatives to Bridge Loans
If a bridge loan isn’t right for you, consider:
- Home equity loan or HELOC – Borrow against your current home’s equity at lower rates.
- Contingent offer – Make your purchase conditional on selling your existing home.
- Rent-back agreement – Sell your current home but rent it from the buyer temporarily until you move.
Final Thoughts
A bridge loan can be a valuable tool for buyers who need short-term financing flexibility, especially in fast-moving real estate markets. But with higher costs and risks involved, it’s important to carefully weigh your options before moving forward.
👉 Pro Tip: Always compare bridge loan terms with alternatives like HELOCs or home equity loans to make sure you’re getting the best deal.