What Is a Bridge Loan?

You finally found a perfect home with the extra bedroom you need, the backyard you’ve dreamed of, and it’s in the right school district. But there is a massive roadblock standing in your way.

You haven’t sold your current home yet, and your equity is still locked in those four walls. In a competitive market, waiting to sell before you make an offer often means losing out to a buyer who can move faster. This is the classic “buy now, sell later” dilemma that leaves many homeowners feeling stuck between two properties.

In this guide, we will answer the following questions:

• What is a bridge loan?
• How much does it cost?
• What are the requirements to qualify?
• What timeline can you expect?

Quick Links:

• Meaning in Simple Terms
• When a Bridge Loan Makes Sense
• How it Works Step by Step
• Rates, Fees, and Total Cost
• Requirements to Qualify
• How Long Does a Bridge Loan Take?
• Bridge Loan vs. HELOC, Equity Loan, and Cash-Out Refi
• Bridge Loan Pros and Cons
• How to Get a Bridge Loan
• Get a Plan Today!
• FAQs

What Is Meant by a Bridge Loan?

In the simplest terms, bridge financing is a short-term loan designed to “bridge” the gap between the purchase of a new property and the sale of an existing one.

We often describe it as a temporary financial safety net. When you have significant equity in your current home but don’t have the liquid cash for a down payment on the next one, this loan allows you to tap into that equity immediately.

Standard mortgage terms usually span 15 to 30 years, but a bridge loan is a different animal entirely. These are typically structured to last anywhere from six months to three years.

According to Fannie Mae, these are also frequently referred to as a swing loan. While they serve a vital purpose, they are not a long-term mortgage replacement.

They are a tool used specifically to cover the down payment, closing costs, or even the payoff of your existing mortgage, so you can transition into your new home without waiting for a buyer to sign on the dotted line.

When a Bridge Loan Makes Sense

Determining if you should use this tool depends largely on your local market and your personal financial cushion. We see these loans used most effectively in “seller’s markets” where houses sell quickly, but competition for new listings is fierce.

Best-fit situations include:

• You want to buy before you sell: You’ve found the “unicorn” home and don’t want to risk someone else buying it while your house is being staged and listed.
• You want to avoid a sale contingency: Most sellers in competitive markets will reject offers that are “contingent” on the buyer selling their own home first. A bridge loan makes you a non-contingent buyer.
• Relocation needs: If you are moving for work and want to make one clean move instead of moving into a temporary rental while waiting for your old home to close, this is a lifesaver. This is especially common for second-time home buyer loans in California, where move-up buyers are upgrading to larger family homes.

When it might not fit:

• Uncertain sale timeline: If your current home is unique or in a slow-moving market, carrying a bridge loan for a year or more can become very expensive.
• Tight monthly budget: You must be able to prove you can handle the “carrying costs” or have enough equity to capitalize the interest into the loan.

How it Works Step by Step

The process of securing bridge financing is more streamlined than a traditional mortgage, but it requires a very clear “exit strategy.” Here is how the process typically unfolds:

Step 1: Estimate Equity and Cash Needs

We start by calculating your current home’s value minus your existing mortgage balance. Most lenders allow you to borrow up to 80% of your home’s total value (the Combined Loan-to-Value, or CLTV). We then determine how much you need for the down payment and closing costs on the new property.

Step 2: Apply and Show Your Plan

When you apply, the lender isn’t just looking at your income; they are looking at the marketability of your current home. You will need to show a clear plan for listing and selling the property.

Step 3: Underwriting and Approval

Lenders perform underwriting checks on your credit score, debt-to-income (DTI) ratio, and cash reserves. They want to ensure that if the sale of your old home is delayed, you aren’t going to default on the bridge loan.

Step 4: Close and Access Funds

Once approved, you head to the closing table. You’ll want to understand exactly what happens on closing day for these temporary loans, as the funding is often distributed directly to the escrow of your new purchase.

Step 5: Payments During the Term

Many bridge loans are “interest-only.” This means your monthly payments are lower during the bridge period because you aren’t paying down the principal yet.

Step 6: The Exit Strategy

When your old home finally sells, the proceeds from that sale are used to pay off the bridge loan in full.

Example of Interest-Only Math:

• Bridge Loan Amount: $100,000
• Annual Interest Rate: 9%
• Annual Interest Cost: $9,000
• Monthly Interest-Only Payment: $750

Note: In this example, you would pay $750/month until the home sells, at which point you pay back the $100,000 principal.

Rates, Fees, and Total Cost

Bridge financing is a specialized product, and because it is short-term and carries higher risk for the lender, it is more expensive than a standard 30-year fixed mortgage.

What Affects Your Cost?
Several factors influence your final price tag. Your credit strength and the amount of equity you have are the primary drivers. Lenders also look at “timeline risk”—how long they expect their money to be out.

Market conditions also play a role; what is the current interest rate for a bridge loan? Generally, you can expect the rate to be 1.5% to 3% higher than traditional mortgage rates.

Typical Fee Buckets
When calculating your budget, you must account for various bridge loan fees, which can include:

• Origination fees: Usually 1% to 2% of the loan amount.
• Underwriting and Admin: Flat fees for processing the specialized paperwork.
• Appraisal: You will need a professional valuation. You should ask your broker how long a house appraisal takes so you can time your purchase offer correctly.
• Title and Escrow: Since this is a legal lien against your property, title work is required. Knowing who pays closing costs in your specific county is vital for your “net proceeds” calculation.

Calculating Total Bridge Loan Cost
Instead of just looking at the rate, look at the “cost of the bridge.” If the fees are $5,000 and the interest for four months is $3,000, your “cost” to buy the new home without a contingency is $8,000. For many, that is a small price to pay to secure a dream home.

Requirements to Qualify

Because bridge loans are “niche” products, the bridge loan requirements are often stricter than standard loans. Lenders want to be certain the “bridge” doesn’t collapse before you reach the other side.

Primary Eligibility Criteria:

• Substantial Equity: Most lenders require at least 20% equity in your current home after the bridge loan is added.
• Credit Profile: A score of 700 or higher is typically preferred, though some private lenders may go lower for a higher fee.
• Debt-to-Income (DTI): Lenders look at your ability to carry both mortgages, plus the bridge payment. However, some lenders allow you to “exclude” the old mortgage payment if the home is under contract.
• Cash Reserves: You should have at least 3–6 months of payments in the bank as a buffer.
• Listing Agreement: Many lenders won’t fund the loan until your current home is officially listed for sale with a real estate agent.

Mini Document Checklist

Before you apply, gather these documents needed to buy a house:

• Current mortgage statement for your existing home.
• Estimated “Net Sheet” from your Realtor showing projected sale proceeds.
• Two years of tax returns and W2s.
• Two months of bank statements showing reserves.

How Long Does a Bridge Loan Take?

Speed is the main reason people seek bridge financing, but it isn’t instantaneous. So, how long does it take to get a bridge loan? On average, you should budget 15 to 30 days.

The timeline is dictated by three main “levers”:

1. The Appraisal: This is usually the longest pole in the tent. If the appraiser is backed up, the loan is backed up.
2. Title Search: The lender must ensure there are no surprise liens on your current home.
3. Your Speed: How quickly you can provide the documentation mentioned in the previous section.

How to speed it up:

• Order the appraisal the same day you apply.
• Use a local mortgage broker who has direct lines to bridge lenders.
• Have your “exit plan” (listing agreement) ready to sign.
• Be proactive with the title if you know there’s an old lien that was never cleared; address it now.

Bridge Loan vs. HELOC, Equity Loan, and Cash-Out Refi

A bridge loan isn’t the only way to tap into your home’s value. Depending on your timing, one of these alternatives might serve you better.

Option	Key Notes	Best For
Bridge Loan vs. HELOC	A HELOC (Home Equity Line of Credit) is often cheaper, but most lenders won’t let you open a HELOC on a home that’s already listed for sale.	People who plan ahead and open the line of credit about 6 months before they start house hunting. Check our HELOC guide for more on this.
Bridge Loan vs. Home Equity Loan	A home equity loan is a lump-sum payment with a fixed rate.	Those who need a set amount of cash and want a predictable, longer-term repayment schedule if they aren’t sure exactly when they will sell.
Bridge Loan vs. Cash-Out Refinance	A cash-out refinance replaces your current mortgage with a new, larger one.	When interest rates have dropped significantly since you bought your home. However, you should compare a cash-out refinance vs. a home equity loan carefully, since closing costs on a full refinance can be much higher than a bridge loan.
Sale Contingency vs. Bridge Loan	You could simply make an offer contingent on your home selling.	Buyer’s markets where sellers are more flexible. In a hot market, this approach often makes your offer less competitive.

Decision Guide:

• If your home is already listed: Use a bridge loan.
• If you are 6 months away from moving: Open a HELOC.
• If you have very little debt and high income: A bridge loan is often the path of least resistance.

Bridge Loan Pros and Cons

Before committing, we always recommend weighing the “convenience factor” against the “cost factor.”

Pros	Cons
Stronger Offers: You can shop as a “cash” or non-contingent buyer.	Higher Interest: You will pay more than a standard mortgage.
One Move: You don’t have to move into an apartment while waiting for your home to sell.	Double Payments: For a few months, you may be responsible for the bridge loan and your new mortgage.
Better Sale Price: You have time to wait for the best offer on your old home rather than rushing into a “fire sale.”	Asset Risk: If your home doesn’t sell within the bridge term, the lender could theoretically initiate foreclosure, though this is rare with a good exit plan.

 

How to Get a Bridge Loan

Ready to take the next step? Getting a bridge loan is a strategic move that requires a bit of prep work.

1. Run the Numbers
   Work with a broker to see exactly how much equity you can pull. You need to know your “magic number” for a down payment.
2. Define the Exit
   Are you listing with an agent? Have you set a realistic price? Lenders want to see a house that is priced to move, not one that will sit on the market for a year.
3. Gather Documents
   Don’t wait for the lender to ask. Have your mortgage statements and tax returns ready in a digital folder.
4. Compare Lender Options
   Not all banks offer bridge loans. In fact, many big-box banks have phased them out. This is where a mortgage broker guide becomes useful—brokers have access to private lenders and boutique firms that specialize in “swing loans.”

Get a Plan Today!

Navigating the timing of a home sale and purchase is one of the most stressful events in a homeowner’s life. We specialize in helping California homeowners bridge that gap with precision. Instead of guessing if you qualify, let’s run a real-world scenario together.

To get started, we typically need three pieces of information:

• Your estimated current home value.
• Your current mortgage balance.
• Your target purchase price for the new home.

We will help you compare bridge financing options and build a backup plan so you can make your next move with confidence.

FAQs

What is a bridge loan in real estate?

In real estate, it is a short-term loan (usually 6–12 months) that allows a homeowner to use the equity in their current home to buy a new property before the old one sells. It “bridges” the cash flow gap between the two transactions.

What’s a bridge loan used for?

It is primarily used for the down payment and closing costs of a new home. It can also be used to pay off the mortgage on the first home to lower the buyer’s debt-to-income ratio, making it easier to qualify for the new permanent mortgage.

How does a bridge loan work if I still have a mortgage?

The bridge loan is usually placed as a “second lien” behind your current mortgage. However, some “closed-end” bridge loans pay off your first mortgage entirely, combining it with your down payment cash into one large temporary loan.

How do bridge loans work if my home takes longer to sell?

Most bridge loans have a set term (like 12 months). If your home hasn’t sold by then, you may need to refinance the bridge loan into a different product or pay a fee to extend the term. This is why pricing your home correctly is vital.

What are bridge loan requirements?

Lenders generally look for at least 20% equity in the current home, a credit score above 700, and a debt-to-income ratio that shows you can manage the increased debt load temporarily. A signed listing agreement with a Realtor is also usually required.

What fees come with a bridge loan?

Expect to pay an origination fee (1–2%), appraisal fees, title insurance, and escrow fees. Because these are short-term and specialized, the administrative costs are often higher than those of a traditional refinance.

What is the current interest rate for a bridge loan?

While rates fluctuate with the market, they are typically 2% to 3% higher than the prevailing 30-year fixed mortgage rate. They are often tied to the Prime Rate plus a specific margin.

How long does it take to get a bridge loan?

The process usually takes between 15 and 30 days. The primary delay is usually the appraisal of the current property and the title search to ensure the equity is clear to be borrowed against.