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Loading...Loading...A bridge loan is a type of short-term financing that lets homeowners borrow against the equity in their current home to buy a new one before they sell the old one.
A bridge loan is a short-term loan that helps you buy a new home while you sell your old one. You can think of it as a temporary fix for your money problems. You want to buy a new house, but your current one hasn't sold yet, and you need money for the down payment or closing costs. A bridge loan was made for that exact situation.
Bridge loans, also known as swing loans or gap financing, are backed by real estate, usually your current home. You can borrow against the equity you've built up over the years, and you pay back the loan when you sell your old house. The terms are short. Most of them last between six and twelve months, but some lenders let them go for up to three years. And since they are only for a short time, the interest rates are usually higher than those on a standard 30-year mortgage.
Why should you care? A bridge loan can help you keep a property you love if you're a homeowner with a lot of equity but not a lot of time. Markets that are competitive move quickly. When sellers are looking at multiple bids, having the money ready can make a conditional offer into a clean one. But this kind of speed costs money, so you should know exactly what you're getting into before you sign.
The idea isn't new. Bridging finance has been around in different forms since at least the 1960s, when banks and building societies in the UK gave short-term loans to people they already knew. Bridge loans became more popular in the US as housing markets got more competitive and buyers needed money faster. The main idea hasn't changed much: borrow money for a short time and pay it back when the sale is done.
Applying for a bridge loan follows a process similar to getting a conventional mortgage. You’ll submit financial documents, authorize a credit check, and provide details about both your current home and the one you plan to buy. The lender reviews your credit score, debt-to-income ratio (DTI), and the equity in your existing property. Many lenders look for a credit score of at least 700 and a DTI below 50%, though those thresholds shift from one lender to the next.
At AmeriSave, our team can walk you through your financing options and help you figure out which path makes the most sense given your specific situation.
Most lenders cap the loan-to-value ratio (LTV) at 80%. So if your current home is worth $400,000 and you still owe $150,000 on the mortgage, the maximum bridge loan amount would typically be $170,000. That’s 80% of the home’s value ($320,000) minus the existing mortgage balance ($150,000). The math can get a little more specific depending on the lender, but 80% LTV is the general ceiling you’ll run into.
Once approved, funds can sometimes arrive in as few as two weeks, which is a lot faster than the Consumer Financial Protection Bureau notes as the typical 30- to 45-day mortgage closing timeline. During the loan term, you’ll usually make interest-only payments each month. When your old home sells, you pay back the bridge loan in a lump sum. If the home doesn’t sell within the loan term, you’re still on the hook for the full balance, so there’s real pressure to price your current property correctly and get it listed quickly.
Not all bridge loans look the same. How the loan is structured affects your monthly payments, how many mortgages you’re juggling, and how much flexibility you have during the transition. Here’s what you’ll typically see.
With this setup, you keep your existing mortgage intact and take out a bridge loan as a second lien on your current home. The proceeds go toward your down payment on the new property. You’ll carry two monthly payments for a while: your original mortgage and the bridge loan. Once your old home sells, you use the sale proceeds to pay off both.
This approach works well if your existing mortgage has a low interest rate you don’t want to lose. You preserve those favorable terms while still accessing equity. The downside? Two payments hitting your bank account every month can stretch your budget thin, especially if the sale takes longer than expected.
This version pays off your existing mortgage entirely. The lender rolls everything into one larger bridge loan that covers both the remaining balance on your current home and the down payment for the new one. You end up with a single monthly payment instead of two, which simplifies cash flow. But the total loan amount is bigger, meaning more interest expense overall.
AmeriSave can help you compare the cost differences between these two structures so you can see which one actually saves you money in the long run. Sometimes the answer isn’t obvious until you put real numbers on paper.
Bridge loans cost more than traditional mortgages. That’s just the reality. You’re paying for speed, flexibility, and a short-term lending arrangement that carries more risk for the lender. Let’s break down the numbers so there aren’t any surprises.
Interest rates on residential bridge loans generally land between 8% and 12%, depending on your credit profile, equity position, and the lender. Compare that to conventional 30-year mortgage rates, which have been hovering in the mid-6% range according to Federal Reserve data. That spread adds up fast on a short-term loan.
On top of the interest rate, expect origination fees of 1.5% to 3% of the loan amount. One point equals 1% of the loan. So on a $150,000 bridge loan, two points would cost you $3,000 at closing. You’ll also encounter standard closing costs similar to what you’d pay on a regular mortgage: appraisal fees, title insurance, recording fees, and attorney costs where applicable.
Tip: Bridge loans aren’t covered by the Real Estate Settlement Procedures Act (RESPA), which means lenders aren’t required to provide the same standardized disclosures you get with a regular mortgage. Ask for a complete fee breakdown in writing before you commit.
Let’s walk through a real example. Say your current home is worth $350,000 and you owe $120,000 on the mortgage. A lender offers a bridge loan at 80% LTV. That gives you a maximum of $280,000 in total borrowing. After paying off your $120,000 mortgage balance, you’d have $160,000 available for your down payment and closing costs on the new home. Now assume the bridge loan rate is 9% and you hold it for six months. On $160,000, that’s roughly $7,200 in interest alone. Add two origination points ($3,200) and maybe $2,500 in closing costs, and your total out-of-pocket for the bridge loan comes to around $12,900. That’s real money. But if it lets you secure a home that’s gaining value in a competitive market, the math might still work in your favor.
A bridge loan isn’t the right call for every situation. But there are a few scenarios where it genuinely solves a problem that other financing can’t.
The most common one is the classic timing mismatch. You’ve found a new home you love, your current home is listed but hasn’t sold yet, and the seller on the new place won’t wait. A bridge loan gives you the buying power to close on the new property without a home sale contingency in your offer. According to the National Association of REALTORS®, properties sat on the market for a median of 36 days at the end of last year, but that varies wildly by region. If you’re in a market where good homes go under contract in a week, waiting for your sale to close first could mean missing out entirely.
Bridge loans also make sense when you need to avoid carrying two full mortgages simultaneously. I talked to a colleague recently who was helping a family work through exactly this situation. They had solid equity but couldn’t qualify for two conventional mortgages at the same time based on their DTI. The bridge loan gave them a path forward.
You might also consider one if you’re relocating for work and need to move quickly but can’t sell on your own timeline. Or if you need funds to get your current home ready for sale before listing it.
Here’s a question worth asking your lender: what happens if my home doesn’t sell within the loan term? AmeriSave can help you think through contingency plans so you’re not caught off guard if the timeline stretches.
I won't make this sound better than it is. You should know that bridge loans are risky before you get one.
Foreclosure is the biggest worry. The house you live in now is the collateral. If your property doesn't sell and you can't pay back the bridge loan when it's due, the lender can take it back. That risk isn't just a theory. It happens. A sale can be delayed beyond your loan term by a slow market, listings that are too expensive, or problems that come up during an inspection.
Another thing is that interest rates are higher. Even if you only need a bridge loan for six months, paying 9% or 10% on it adds thousands of dollars to your total moving costs. And since the repayment plan usually includes a balloon payment at the end, the entire balance is due all at once.
You're also dealing with complicated finances. You might have your original mortgage, a bridge loan, and the new mortgage all at the same time, depending on how the loan is set up. That means you have to make three separate payments. If something unexpected happens, like losing a job or having to make a big repair on either property, the stress builds up quickly.
One more thing to keep in mind: bridge loans are not covered by RESPA, so you might not have as many protections as you would with a regular mortgage. If you don't have to tell as much, you'll have to do more research on your own. Look over each document very carefully. Look at offers from more than one lender. Also, don't forget to read the fine print about prepayment penalties.
It's a good idea to look at other options before you agree to a bridge loan. Depending on how much money you have, one of these options might get you to the same place for less money.
You get a lump sum based on the equity in your home with a home equity loan, and you pay it back over a longer period of time, sometimes 20 or 30 years. Interest rates are usually lower than bridge loan rates, and the longer repayment period makes it easier to make monthly payments. The trade-off is speed. It can take a few weeks for a home equity loan to close.
A home equity line of credit (HELOC) is like a credit card that is backed by your home. During the draw period, you can take out as much money as you need and only pay interest on what you borrowed. AmeriSave has HELOCs with flexible draw periods and competitive terms. These can be a good option if you need money but don't want to pay the higher costs of bridge financing. One thing to keep in mind: some lenders won't let you open a HELOC on a home that's for sale right now, so timing is important.
The free option is to make a contingent offer. You make an offer on the new home, but you have to sell your current home first. The risk is that sellers in competitive markets might turn down offers with conditions in favor of bids that are cleaner.
Hey, there isn't just one right answer here. There are pros and cons to each choice. The important thing is to find financing that fits your budget, timeline, and risk tolerance.
Bridge loans help you buy something before you sell it. They are quick, adaptable, and made for short-term changes. But they're also expensive, and if your current home doesn't sell as quickly as you thought it would, you could lose a lot of money. Before you make a decision, do the math. Add up the closing costs, fees, and interest, and then decide if the cost is worth the peace of mind of locking in your next home now. And talk to a lender who can show you all of your choices next to each other. You can use AmeriSave to compare bridge financing to other options like HELOCs and home equity loans so you can make a smart, confident choice.
Most lenders for bridge loans want you to have a credit score of at least 700. But some lenders will still give you money if your score is 680 or lower, depending on how much equity you have and how good your overall financial situation is. If your credit score is higher, you might be able to get a lower interest rate. If your credit score isn't great, AmeriSave's prequalification tool can help you figure out where you stand and look into other ways to get money that might be better for you.
It only takes two to three weeks to close a bridge loan, which is much faster than the 30 to 45 days it takes to close a regular mortgage. Bridge loans have a shorter time frame because they don't have to follow as many rules. It's important to ask about timelines ahead of time because different lenders work at different speeds. To get a better idea of what's out there and how different types of loans fit into your timeline, look at AmeriSave's current mortgage rates.
Like mortgage interest deductions work now, the interest on a bridge loan to buy your main home may be tax deductible. How you use the money and your own tax situation will determine how much you can deduct. Talk to a tax expert about your own situation. You could also see if AmeriSave's home equity products could help you with your taxes.
You are still responsible for the full amount of the bridge loan even if your home doesn't sell by the end of the loan term. Some lenders might give you a little more time, but they don't have to. Extensions usually cost more. You might lose the property you put up as collateral if things go really wrong. It's very important to have a backup plan and a realistic pricing plan. Before you sign up, the loan team at AmeriSave can help you make backup plans.
Most lenders want you to have at least 20% of your home's value right now, and they won't let you borrow more than 80% of that value. You can only get the money if you owe $320,000 or less on your house. If you have more equity, you can borrow more money. If you don't already know how much equity you have, AmeriSave's home equity options page can help you find out.
It all depends on how much time and money you have. HELOCs usually have lower interest rates and more flexible repayment terms than bridge loans. But they take longer to close, and they might not be available if your house is already on the market. Bridge loans close faster and give you a lump sum, which can be helpful when there are a lot of other people trying to get the same thing. AmeriSave's HELOC and home equity loan comparison can help you figure out which choice is best for you.
Yes. One of the most common things people do with bridge loan money is put down money on a new home. You can use the loan to get money out of your current home so you can quickly make a down payment on the next one. A bridge loan that covers 20% of the down payment can sometimes help you avoid having to pay private mortgage insurance (PMI) on the new conventional mortgage. Check out AmeriSave's loan options to see what kinds of down payments you can make.
No. A lot of traditional banks and mortgage lenders don't give out bridge loans. Credit unions, regional banks, and private lenders that only give out short-term real estate loans are more likely to do so. Availability also changes from state to state. If a lender doesn't offer bridge loans, they might offer other options through AmeriSave that do the same thing for less money, like home equity loans or HELOCs.
Most of the time, the closing costs for bridge loans are 1.5% to 3% of the loan amount, plus fees for appraisals, title insurance, and lawyers if you need them. The closing costs for a $150,000 bridge loan could be between $4,000 and $7,000, depending on the lender and where you live. RESPA doesn't cover bridge loans, so fee disclosures might not be as common for them. Start with AmeriSave's prequalification process and look at different ways to pay for things. This will help you get a better idea of how much everything will cost.
Most lenders won't give you a bridge loan if your credit score is less than 680. But some private lenders might work with lower scores if you have a lot of equity and a solid plan for getting out. Expect the rules to be stricter and the interest rates to be higher. You might find it easier to get other things if you have bad credit. Look at AmeriSave's different mortgage options to find the ones that don't require a high credit score. For example, FHA loans start at 500.
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