Definition
A bridge loan lets you close on a new home immediately while your current home sells. You borrow money to make your down payment, then repay from your current home sale proceeds. It costs more (higher rates) but eliminates contingencies and strengthens your offer.
Where you’ll meet it
Should I sell first or buy first?
See it in Moving up to my next home · Step 2About this term
Bridge loans are intermediate financing tools for buyers whose sale and purchase timelines don't align. Borrowers can make a strong offer on a new home without contingencies while their current home sells. Once the existing home sells, the bridge loan is paid off from sale proceeds. Bridge loans have higher interest rates (typically 1-2% above mortgage rates) and shorter terms (6-12 months) because they're riskier for lenders. They require sufficient equity in the existing home and may have rigorous approval processes.
Pro Tip
Bridge loans are expensive; only use them if your competitive advantage (non-contingent offer) justifies the cost.
Example
You find your dream home and want to bid without a sale contingency, but your current home won't close for 60 days. A bridge loan lets you close on the new home immediately, using a bridge loan's $200,000 to supplement your down payment.