Understand how bridge loans let you buy your next home before selling your current one, including true costs and whether this strategy makes sense for your situation.
Key Takeaways
- Bridge loans let you buy your next home before selling your current one
- They cost 1.5-3% higher rates plus 2-5% in fees—typically $7,000-$9,250 for $100,000 borrowed
- They work best when your current home is listed and expected to sell within 60-90 days
- You'll pay interest-only ($1,000-$1,500/month on $150,000) while waiting for your sale
- If your home doesn't sell on time, you could end up paying two mortgages simultaneously
What Is a Bridge Loan?
Selling a home is one of life's major decisions — whether you're downsizing, relocating, or starting a new chapter. This is the moment when having a trusted guide makes all the difference.
A bridge loan provides short-term financing that "bridges" the gap between buying your new home and selling your current one. Instead of waiting to sell your current house, you can make an offer on your next home immediately—and repay the bridge loan when your old house sells.
Bridge loans are typically 6 to 12 months. They're designed to be paid off quickly once your sale closes, not to become your permanent mortgage. Here's the scenario: You find a home you love, but your current house hasn't sold yet. A bridge loan gives you the cash now.
The Real Cost of Bridge Loans
Bridge loans charge 1.5% to 3% higher interest rates than mortgages, plus 2% to 5% in fees upfront. On a $100,000 bridge loan at 8.5% interest for six months, you'd pay about $4,250 in interest. Add in origination fees ($2,000-$3,000) and closing costs ($1,000-$2,000), and your total cost is $7,000-$9,250.
If your bridge loan lasts a full year, the interest cost doubles to about $8,500. Longer delays mean higher costs. This is why bridge loans work only when you're confident your home will sell within 60-90 days.
When Bridge Loans Make Sense
Bridge loans work best when your current home is already listed and generating showings, the market is seller-friendly for your type of home, your realtor estimates a sale within 60-90 days, and you found your next home in a competitive market. You'll need a strong credit score (700+), low debt-to-income ratio (under 40%), and significant home equity.
Alternatives include a home equity line of credit (HELOC) on your current home, which might be cheaper. You could also make a contingent offer: "I'll buy this for $450,000, contingent on selling my current home within 60 days." Many sellers accept this in buyer-friendly markets.
Combining Bridge and Permanent Mortgages
You'll deal with two loans simultaneously: your bridge loan and your new home's permanent mortgage. Some lenders offer a "bridge and permanent" combo that simplifies the process. When your old home sells, the bridge lender takes their principal back from sale proceeds, and your new home's permanent lender handles the rest.
What to Do Next
- List your current home first and get a realistic sale timeline
- Compare bridge loan offers from 2-3 lenders
- Calculate total costs: interest + fees for different timelines
- Verify pre-approval for your new home's permanent mortgage
- Review prepayment penalties and interest calculation method
- Have an attorney review all loan documents
Have questions about bridge loans and buying before you sell? The team at Thrive.RealEstate is here to help — no obligation, no pressure. We believe everyone deserves expert guidance through life's biggest real estate decisions.
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This article is part of Moving up to my next home, step 2: Should I sell first or buy first?