If your purchase is contingent upon the sale of another property but you don’t want the
hassle of coordinating the sale/purchase transactions, and you have sufficient equity in
the for-sale property, a bridge loan is one financing option that can help you bridge the
financial gap between your new home purchase and old home sale.
With a bridge loan, the mortgage loan used to purchase the new home will use the old
home as collateral. Typically eligible borrowers must have an income that can afford the
cost of the two simultaneous mortgages. A bridge loan usually offers a six-month or one-
year term, and with this type of loan the associated costs (interest, points and fees, etc.)
can be higher than with a more traditional loan.
A bridge loan can be a useful tool for buyers who plan to sell but who need financial
flexibility in a hot housing market – sellers don’t like contingencies based on the buyer’s
ability to close on the sale of their home.
The structure of a bridge loan can vary widely. If you’re considering this type of interim
financing, it’s a good idea to consult with a mortgage professional who can walk you
through your options.