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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