What Is a Bridge Loan? How to Buy a New Home Before Selling Yours
Last updated: October 2026 · Editorial standards
Buying a new home while still owning your current one puts you in a financial bind. You need the equity from your existing home to fund the down payment on the new one — but you haven’t sold it yet.
A bridge loan solves that problem by giving you short-term financing to close on the new home before your old one sells.
How a Bridge Loan Works
A bridge loan is a short-term mortgage — typically 6 to 12 months — secured by your current home. The lender advances you a portion of your home’s equity, which you use as a down payment on your new home.
Once your existing home sells, you pay off the bridge loan with the proceeds.
Example:
- Your current home is worth $400,000 with a $200,000 mortgage
- You have $200,000 in equity
- A lender might offer a bridge loan of up to 80% of that equity — $160,000
- You use that $160,000 as a down payment on your new home
- When your old home sells, you repay the bridge loan
Bridge Loan Costs
Bridge loans are expensive compared to traditional mortgages:
- Interest rates: Typically 2–4% above the prime rate
- Origination fees: Usually 1–3% of the loan amount
- Appraisal and closing costs: Similar to a standard mortgage
- Short term: You’re paying high rates for a short window, but those months add up
Because of these costs, bridge loans make the most sense when you expect your current home to sell quickly.
Qualifying for a Bridge Loan
Lenders typically require:
- Strong credit: Usually 680+ credit score
- Low debt-to-income ratio: You’ll be carrying two mortgages temporarily
- Sufficient equity: Most lenders require at least 20% equity in your current home
- A sale contract or strong market conditions: Some lenders want to see that your home is listed
Not all lenders offer bridge loans. You’ll have better luck with local banks, credit unions, and portfolio lenders than with large national banks.
Bridge Loan vs. HELOC
A home equity line of credit (HELOC) is often a cheaper alternative to a bridge loan — if you have time to set it up before you need to move.
| Feature | Bridge Loan | HELOC |
|---|---|---|
| Setup time | Fast | Slower |
| Interest rate | Higher | Lower |
| Availability | Limited lenders | Widely available |
| Flexibility | Fixed amount | Draw as needed |
The problem with a HELOC: if your home is listed for sale, many lenders won’t open one. Bridge loans don’t have that restriction.
When a Bridge Loan Makes Sense
Bridge loans work best when:
- You’ve found your dream home and don’t want to lose it
- Your local market is competitive and contingent offers are routinely rejected
- You expect your current home to sell quickly
- You have enough equity to make the math work
- You can afford to carry two mortgage payments temporarily
Alternatives to a Bridge Loan
- Contingency offer: Make your purchase offer contingent on selling your current home. Sellers may reject this in hot markets.
- Sell first, rent temporarily: Sell your current home, rent while searching, then buy.
- cash-out refinance: Refinance your current home to pull out equity, though this takes longer and may not work if the home is listed.
- 401(k) loan: Borrow from your retirement account for the down payment, then repay when your home sells.
Key Takeaways
Bridge loans are a useful but expensive tool for homeowners caught between two transactions. Before applying, compare the cost against alternatives, and make sure you can comfortably carry both mortgage payments if your home takes longer to sell than expected.
Frequently Asked Questions
How long is a bridge loan? Typically 6 to 12 months, though some lenders offer up to 24 months.
Can I get a bridge loan if my home isn’t listed yet? Some lenders will approve a bridge loan before your home is listed, but requirements vary.
Do I make monthly payments on a bridge loan? Usually yes, though some bridge loans are structured to defer payments until the existing home sells.
What if my home doesn’t sell before the bridge loan expires? You’ll need to refinance or sell quickly. If you can’t repay, the lender can foreclose on your current home.
