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Bridge Loan
What Is a Bridge Loan?
A bridge loan is a short-term loan used to finance a new home purchase while waiting to sell an existing property.
It “bridges” the financial gap between transactions.
Why It Matters in a Mortgage
Bridge loans:
- Provide temporary liquidity
- Allow competitive purchase offers
- Reduce need for contingency clauses
They typically carry higher interest rates and shorter repayment terms.
How It Works
- Homeowner buys new home before selling old one.
- Bridge loan covers down payment or interim financing.
- Loan is repaid once previous property sells.
Bridge Loan vs. Home Equity Loan
Bridge Loan → Short-term, transaction-specific
Home Equity Loan → Longer-term borrowing
Purpose and structure differ.
FAQs About Bridge Loans
Are bridge loans risky?
They carry risk if the original property does not sell quickly.
Do they require strong credit?
Yes, lenders evaluate equity and repayment ability carefully.
Are they common?
More common in competitive real estate markets.
Related Terms
