Bridge Loan
Short-term financing that helps a buyer purchase a new home before selling their existing one.
Bridge loans solve a classic timing problem: you want to buy your next home but most of your down payment is locked in equity in your current home, which hasn't sold yet. A bridge loan unlocks that equity for a short period, typically six to twelve months, to fund the new purchase.
Rates and fees on bridge loans run higher than standard mortgages because of the short term and the underwriting around two simultaneous properties. Most are structured to require interest-only payments during the bridge period and a balloon payoff when the original home sells.
Bridge loans aren't the only solution to this problem. Contingent purchase offers, HELOCs on the existing home, or simply buying after selling are all alternatives. A bridge makes most sense in competitive markets where a contingent offer wouldn't compete and the borrower has high confidence the existing home will sell quickly.
Related terms
Other terms you'll see alongside Bridge Loan
A revolving credit line secured by your home's equity, with a variable rate and draw period followed by repayment.
A refinance that replaces your existing mortgage with a new, larger loan and returns the difference to you as cash.
The portion of your home's value you own outright, calculated as current value minus what you owe on the mortgage.
The loan amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower).
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