Buying and selling a home at the same time can be stressful. If your current home hasn’t sold but you’ve found your next dream property, a bridge loan could help you act quickly without the added stress of sale contingencies.
What Is a Bridge Loan?
A bridge loan — also called a swing or gap loan — is a short-term financing option that uses your current home’s equity to fund the purchase of your new one. You can learn more in Mortgage.com’s guide to bridge loans.
When to Consider a Bridge Loan
A bridge loan can be the right choice if you want to make a non-contingent offer in a competitive market, as highlighted by American Mortgage Resource. It’s also a smart move if you need fast access to funds to secure a property before your current home sells or if you want to avoid the hassle of temporary housing between closings, as noted by Times Union Real Estate.
How It Works
Your existing home is used as collateral, and lenders typically offer up to 80–85% of the combined value of both properties, according to CrossCountry Mortgage. Terms are generally short — often 6 to 12 months — and funds can sometimes be available in as little as two weeks, as explained by Bankrate. Payments may be interest-only during the term, or the interest may be rolled into a balloon payment due once your current home sells.
Pros of Bridge Loans
One major advantage is speed — you can get quick access to cash for a down payment, which REI Prime says is a key benefit in competitive markets. They also let you make offers without a home-sale contingency, giving you a stronger position as a buyer. Another plus is convenience: you can move directly into your new home and avoid renting or moving twice, as noted by Times Union.
Cons of Bridge Loans
Bridge loans often come with higher interest rates compared to traditional mortgages, warns Realtor.com. There’s also the potential financial strain of carrying two mortgages at the same time if your current home doesn’t sell quickly. Finally, they can carry more risk — if your home takes too long to sell, you could face significant repayment pressure.
Are You Eligible?
Most lenders require 15–20% equity in your current home, according to Bankrate. You’ll also need a solid credit score and a debt-to-income ratio under about 50%, as noted by Times Union.
Alternatives to Bridge Loans
If a bridge loan isn’t the best fit, you might explore a home equity line of credit (HELOC), which generally offers lower rates but takes longer to secure. An 80-10-10 loan — a type of split financing — can also help you avoid private mortgage insurance, as explained by REI Prime. Or, you could choose to sell your current home first and rent temporarily, reducing financial risk.
Bottom Line
A bridge loan can be a powerful tool when used strategically. Work closely with your lender and real estate agent to decide if it’s the right choice for your situation. For a full overview, check out Mortgage.com’s complete guide to bridge loans.
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