A bridge loan is a short-term loan used to "bridge the gap" between buying a new home and selling your current one. It's typically used by homebuyers who need funds for a down paymenme before their existing home sells.

Here's how it works:

You own a current home and want to buy a new one.

You haven't sold your current home yet, so your cash is tied up in its equity.

A bridge loan gives you access to that equity—before the sale closes—so you can make a down payment or cover closing costs on the new home.

The bridge loan is secured by your current home, and repayment typically comes from the proceeds once it sells.

Key Features:

Term: Usually 6–12 months.

Interest Rates: Higher than a traditional mortgage.

Repayment: Often interest-only during the term, with a balloon payment (full payoff) at the end.

Loan Amount: Usually up to 80% of the combined value of both homes (existing + new).

Example:

Your current home is worth $400,000 with a $250,000 mortgage (so $150,000 equity).

You want to buy a $500,000 home.

A bridge loan lets you borrow against some of that $150,000 equity to cover the new home's down payment while waiting for the current home to sell.

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