What a bridge loan is
A bridge loan is short-term financing secured against your current home that lets you access your equity before the sale funds arrive. It pays the down payment and closing costs on the new home, then gets repaid in full when your sale closes. Terms are measured in days and weeks, not years.
The requirements
Lenders bridge against certainty, so the standard requirement is a firm, unconditional sale agreement on your current home. With a signed agreement and waivers completed, most banks and many alternative lenders will bridge. Without a firm sale, options narrow to private lenders at higher cost.
- Firm sale agreement on your current home
- Firm purchase agreement on the new one
- Enough equity to cover the gap and the costs
What it costs
Expect a setup fee of a few hundred dollars plus interest at a floating rate, often prime plus a margin, charged only for the days the bridge is outstanding. A two-week bridge on three hundred thousand dollars typically costs in the low thousands, not the tens of thousands people imagine.
How to make the gap disappear
The cheapest bridge is no bridge. When you negotiate your purchase, try to align closing dates, or negotiate a longer closing on the purchase to give your sale room. A flexible buyer with a well-timed offer sometimes avoids the bridge entirely, and your agent and broker should be working that calendar together from the start.
Frequently asked questions
- How long can a bridge loan last?
- Typically up to ninety days, sometimes longer with private lenders. The shorter the gap, the cheaper and easier the bridge.
- What if my sale falls through after I bought?
- That is the scenario bridge lenders protect against by requiring a firm sale. If it happens anyway, the bridge converts to a serious problem requiring immediate refinancing or private lending. This is why waivers matter.
- Is bridge financing the same as a HELOC?
- A HELOC can serve the same purpose if you have one with room. The advantage is no setup process; the catch is you must have arranged it before you needed it.