The Ultimate Guide to Bridge Loans

If you’re ready to buy a new home but haven’t yet received the money from selling your current one, you might be unsure how to cover the gap in funding. One option that may help is a bridge loan.

A bridge loan is a short-term financing tool used in real estate to provide cash flow during a transition period, such as moving from one property to another when the timing does not match up. It is intended to be temporary and is usually paid off once your existing home is sold. Lenders set their own guidelines for how bridge loan funds may be used, and the eligibility criteria often differ from those for standard residential mortgages.

Keep reading to learn more about how bridge loans work, what lenders typically require, the upfront costs and potential risks involved, and some alternative options you may want to explore.

What Is a Bridge Loan?

A bridge loan is temporary financing secured by your current home’s equity. Unlike a traditional 30-year mortgage, bridge loans typically last 6-12 months and are designed to be paid off quickly once your existing property sells.

How it differs from other loans:

• Traditional mortgage: Long-term financing (15-30 years) for purchasing a home
• Home equity loan: Borrows against equity but isn’t specifically designed for buying before selling
• Bridge loan: Short-term (6-12 months) specifically for transitional periods between properties

Common uses for bridge loans:

• Buying a new home before your current one sells
• Making non-contingent offers in competitive markets
• Covering temporary cash flow gaps during a move
• Funding renovations on a new property before securing permanent financing

The key advantage is speed. Bridge loans can be approved in as little as 72 hours, compared to 30-45 days for conventional mortgages.

How Does a Bridge Loan Work?

Bridge loans use your current home as collateral. The lender evaluates your home’s market value, subtracts what you still owe on your mortgage, and determines how much equity you can borrow against.

Example scenario:

• Current home value: $400,000
• Remaining mortgage: $200,000
• Available equity: $200,000
• Maximum bridge loan (at 80% LTV): $160,000

Most lenders cap bridge loans at 80% of your equity to protect themselves if property values decline.

Typical Loan Structure

Bridge loans follow an interest-only payment structure during the loan term. This means your monthly payments only cover interest charges—not the principal balance.

At the end of the loan term (typically 3-12 months), you make a balloon payment that covers the entire principal amount. This payment usually comes from the proceeds when you sell your current home.

Timeline example:

1. Take out bridge loan in January for $100,000
2. Make interest-only payments February-June ($800/month at 9.6% APR)
3. Sell current home in July for $400,000
4. Use sale proceeds to pay off $100,000 bridge loan balance
5. Keep remaining equity for your new home

This approach is best suited for situations where you feel confident your home will sell within the bridge loan term. If the sale takes longer than expected, you may need to refinance the bridge loan or secure another source of funds to pay it off.

Average Bridge Loan Rates and Costs (2025)

Bridge loans typically cost more than standard mortgages because they are short term and carry more risk for lenders.

Interest rates on bridge loans are often 2 to 3 percentage points higher than conventional mortgage rates, which are currently around 6.5% to 7.5% (November, 2025).

Common fees and closing costs:

Bridge loan fees typically include:

• Origination fees: 1-2% of loan amount
• Appraisal fees: $300-600
• Title search and insurance: $500-1,500
• Closing costs: 1.5-3% of total loan value
• Processing and underwriting: $400-800

Real cost breakdown for a $300,000 bridge loan:

• Loan amount: $300,000
• Interest rate: 10% APR
• Term: 6 months
• Origination fee (1.5%): $4,500
• Closing costs (2%): $6,000
• Monthly interest payment: $2,500
• Total interest over 6 months: $15,000
• Total cost: $25,500

While this may seem expensive, the added cost can be worthwhile if it allows you to secure your ideal home in a competitive market or avoid the hassle and expense of moving twice.

Bridge Loan Requirements and Eligibility

Bridge loans often come with tougher qualification standards than traditional mortgages, since you are essentially asking the lender to let you carry two home loans at the same time. 

Lenders typically expect a higher credit score, a lower debt to income ratio, and substantial equity in your current home, along with strong, stable income and sufficient cash reserves. 

Some lenders may also limit how high your total combined loan balances can be and look more closely at your overall financial profile to be sure you can comfortably handle the payments until your existing home sells.

Equity Requirements

Lenders typically want to see a solid equity cushion before approving a bridge loan. In most cases, you will need at least 20% to 30% equity in your current home. Some lenders allow total financing up to about 80% of your home’s value, but a maximum loan-to-value ratio in the 70% to 75% range is more common.

How to calculate your available equity

Here’s a simple way to estimate how much equity you can tap for a bridge loan. Follow these steps to get a ballpark figure before talking to a lender.

• Get a current home appraisal or recent sale comparable
  Start by figuring out what your home is worth today. You can do this through a professional appraisal, a comparative market analysis from a real estate agent, or by reviewing recent sales of similar homes in your neighborhood. The more accurate this value is, the more reliable your equity calculation will be.
• Subtract your remaining mortgage balance
  Next, look up the current payoff amount on your existing mortgage (and any home equity loans or lines of credit). Subtract this total from your home’s current market value. The result is your home equity in dollars. For example, if your home is worth $500,000 and you owe $300,000, your equity is $200,000.
• Multiply the result by 0.70 (for 70% LTV) or 0.80 (for 80% LTV)
  Lenders often limit total borrowing to a percentage of your home’s value. To estimate how much you might be able to borrow with a bridge loan, multiply your home value by the lender’s maximum loan-to-value (LTV) ratio, such as 70% or 80%, and then subtract your existing mortgage balance. Using the same example:
  • At 70% LTV: $500,000 × 0.70 = $350,000. Then $350,000 − $300,000 existing mortgage = $50,000 potential bridge loan amount.
  • At 80% LTV: $500,000 × 0.80 = $400,000. Then $400,000 − $300,000 existing mortgage = $100,000 potential bridge loan amount.

This gives you a rough estimate of how much equity you can tap through a bridge loan, subject to the lender’s full underwriting and other qualification requirements.

Credit Score 

Traditional lenders generally require a credit score of at least 700 for bridge loan approval. However, certain private lenders may consider applicants with scores in the mid-600s (approximately 650–699), provided the underlying property offers strong collateral support and the overall risk profile is acceptable.

Income and Debt-to-Income 

Although bridge lenders typically place less emphasis on income than traditional mortgage lenders, they still need to confirm that you can afford the monthly interest payments. Some may permit debt-to-income ratios as high as 50%, but carrying two mortgage payments at once can make this level of debt more difficult to manage.

What lenders want to see:

• Stable income or sufficient cash reserves
• Ability to cover interest-only payments on the bridge loan
• Financial capacity to handle both mortgages if the home doesn’t sell immediately

Lender Documentation

Be prepared to provide:

• Proof of home listing or accepted offer on your current home
• Sale agreement or purchase contract for new home
• Recent tax returns (typically 2 years)
• Pay stubs or W-2s
• Bank statements showing reserves
• Property appraisal
• Clear exit strategy (how and when you’ll repay)

Many lenders require that your current home be actively listed for sale before they will approve a bridge loan. In some cases, lenders may also request a copy of the listing agreement or verify that the property is marketed at a realistic price based on local comparables.

Pros and Cons of Bridge Loans

As with any type of financing, bridge loans come with both advantages and drawbacks. Here is an overview to help you weigh the potential benefits against the risks.

Pros

• A bridge loan can give you the ability to purchase a new home before you sell your current one, which can be critical in a competitive, fast-moving market where desirable properties do not stay listed for long.
• You can access funds quickly. In many cases, approval can take as little as 72 hours, with funding available in about two weeks, compared with the 30 to 45 days that a traditional mortgage process often requires.
• You can make stronger offers. By using a bridge loan, you may be able to avoid including a home sale contingency, which many sellers view as a weaker offer compared with non-contingent buyers.
• You may be able to avoid private mortgage insurance. If you use bridge loan proceeds to make a down payment of 20 percent or more on your new home, you can often skip PMI, which may save you thousands of dollars per year.
• You gain flexibility in how and when you sell. Instead of rushing to sell your current home at a discount, you can take time to stage, market, and price it properly so you have a better chance of achieving a stronger sale price.

Cons

• Bridge loans usually come with higher interest rates than conventional mortgages. Rates often fall in the 9 to 11 percent range, compared with about 6.5 to 7.5 percent for traditional loans. On a 100,000 dollar bridge loan, that can translate to roughly 800 to 900 dollars per month in interest-only payments.
• The repayment period is short. Most bridge loans need to be repaid within 6 to 12 months, which can create pressure if your home does not sell as quickly as you expected.
• There is meaningful risk if your home does not sell promptly. If the property is still on the market when the loan term ends, you may face extension fees or higher interest costs, the strain of carrying two full mortgage payments at once, and in a worst case scenario, the possibility of foreclosure if you cannot repay the loan.
• Lender options can be limited. Many traditional banks do not offer bridge loans, so you may need to work with private lenders or specialized bridge loan companies, which may have different pricing and terms.
• There are upfront costs. Origination fees and closing costs often total 2 to 4 percent of the loan amount and are due immediately, which reduces the net cash you receive from the bridge loan.

When a Bridge Loan Makes Sense

Bridge loans tend to work best in certain situations, especially when timing is tight and market conditions support a quick sale of your current home.

You’ve Found a New Home Before Selling the Old One

This is the most common bridge loan scenario. You’ve been house hunting and found the perfect property, but your current home hasn’t sold yet.

Why it works: In competitive markets, sellers receive multiple offers within days. Home sale contingencies make your offer less attractive. A bridge loan lets you compete with cash buyers and investors who can close quickly without contingencies.

You Need to Close Quickly

Some situations demand speed:

• Relocating for a new job with a firm start date
• Your children need to enroll in a new school district
• The seller requires a fast closing
• You’re competing in a bidding war

Bridge loans can close in 2 weeks versus 30-45 days for conventional financing.

You Have Strong Home Equity

Bridge loans work best when you have significant equity built up. With 30-40% equity, you have cushion for market fluctuations and can borrow enough for a substantial down payment.

Ideal equity scenarios:

• You’ve owned your home 5+ years and built substantial equity
• Your home has appreciated significantly
• You’ve made extra principal payments
• You have a low loan-to-value ratio (below 60%)

You’re in a Strong Housing Market

Bridge loans carry less risk when:

• Homes in your area sell within 30-60 days
• Inventory is low and demand is high
• Multiple offers are common
• Prices are stable or rising

Check local real estate market data before proceeding. If average days on market exceed 90 days, a bridge loan becomes riskier.

When a Bridge Loan Might Not Be the Best Option

Certain situations make bridge loans impractical or unnecessarily risky.

Low Home Equity

If you have less than 20% equity, you likely won’t qualify for a bridge loan. Even if you do, borrowing against minimal equity leaves no cushion if your home value drops.

Uncertain Selling Timeline

Bridge loans create pressure because of their short terms. Avoid them if:

• Your home needs significant repairs before listing
• Your local market is slow (90+ days average sale time)
• Economic conditions are uncertain
• You’re unsure about pricing strategy

High-Interest Rate Environment

When bridge loan rates exceed 11-12%, the cost may outweigh the benefits. In these conditions, alternatives like HELOCs (which have lower rates) become more attractive.

You Qualify for Better Alternatives

If you can secure a home equity loan at 7-10% or a HELOC at 6-9%, these options cost less and provide more flexibility than bridge loans at 9-11%.

Consider your options if:

• You don’t need funds immediately
• Sellers will accept a home sale contingency
• You can negotiate a longer closing period
• You have access to other sources of cash

Alternatives to Bridge Loans

A bridge loan is not the only way to access short-term funds when you are between homes. Several other financing options can help you cover a down payment or manage cash flow while you transition. Here are some of the most common alternatives.

Home Equity Loan

A home equity loan lets you borrow a lump sum against the equity in your current home, using the property as collateral. These loans are usually long term, often 10 to 20 years, and typically offer fixed interest rates.

Compared with a bridge loan, a home equity loan is often more affordable because of the longer repayment term and potentially lower rate. However, if you sell your home, you will usually have to pay off the home equity loan at closing.

This option can still leave you carrying two mortgages if you buy a new home before selling the old one, so it tends to work best if you plan to keep your current property for a while or have strong confidence in your ability to manage the combined payments.

Home Equity Line of Credit (HELOC)

A home equity line of credit, or HELOC, also uses your home as collateral but works more like a credit card than a traditional loan. You are approved for a maximum line amount, and you draw funds only as needed to cover your short-term financing gap.

Compared with many bridge loans, HELOCs often provide:

• More favorable interest rates
• Lower closing costs
• Greater flexibility in how and when you borrow

You can typically use a HELOC for multiple purposes, including covering a down payment or funding home improvements. Some HELOCs may have prepayment penalties if you pay off the balance in a short period, so it is important to review the terms carefully.

80-10-10 Loan

An 80-10-10 loan, sometimes called a piggyback loan, is a structure that uses two mortgages to reduce your required cash at closing and help you avoid private mortgage insurance.

The numbers refer to:

• 80 percent: your primary first mortgage
• 10 percent: a second mortgage
• 10 percent: your cash down payment

In practice, you pay 10 percent down, finance 80 percent with a first mortgage, and cover the remaining 10 percent with a second mortgage. After you sell your current home, you may be able to use the sale proceeds to pay off the smaller second mortgage and simplify your overall financing.

This strategy can be useful if you want to minimize cash out of pocket while still avoiding mortgage insurance, but it does mean managing two separate mortgage payments on the new property until the second loan is paid off.

Personal Loan

If you have strong credit, stable income, a history of on-time payments, and a low debt to income ratio, a personal loan may be another option.

Personal loans can be:

• Unsecured, where no collateral is tied to the loan
• Secured, where you pledge an asset as collateral

Because many personal loans are unsecured, approval will depend heavily on your credit profile and overall financial strength. Interest rates and terms vary widely by lender, and borrowing limits may be lower than what you could obtain through home equity products.

A personal loan may be most appropriate when you need a relatively modest amount of short-term funding and prefer not to tie additional debt directly to your home.

Bridge Loan Alternatives Comparison

The right choice depends on your timeline, how much you need to borrow, and whether you need immediate access to funds.

How to Apply for a Bridge Loan

Follow these steps to maximize your chances of approval and secure the best possible terms.

Step 1: Get Your Current Home Appraised

Before applying, you need to know your home’s current market value. This determines how much equity you can borrow against.

Options for valuation:

• Hire a licensed appraiser ($300-600)
• Get a Comparative Market Analysis from a real estate agent (often free)
• Use online valuation tools as a starting point (Zillow, Redfin)

Get a professional appraisal for the most accurate number. Lenders will require one anyway during underwriting.

Step 2: Calculate Equity and Loan-to-Value Ratio

Use this formula to determine your borrowing capacity:

1. Current home value: $400,000
2. Minus remaining mortgage: -$200,000
3. Equals equity: $200,000
4. Maximum bridge loan (at 80% LTV): $160,000

Remember that most lenders cap at 70-80% of equity, not 100%.

Step 3: Gather Income and Financial Documents

Prepare these materials before applying:

• Last 2 years of tax returns
• Recent pay stubs (last 2 months)
• W-2s or 1099s
• Bank statements (2-3 months)
• Current mortgage statement
• Property tax records
• Homeowners insurance declaration
• List of other debts and monthly payments

Having everything ready speeds up the approval process significantly.

Step 4: Compare Lenders and Terms

Shop around to find the best terms.

Questions to ask each lender:

• What’s your interest rate for my profile?
• What are the total fees (origination, closing, etc.)?
• How long is the loan term?
• Are there prepayment penalties?
• What’s the timeline from application to funding?
• Do I need to list my home before approval?
• What happens if my home doesn’t sell in time?

Get quotes from at least 3 lenders. Private lenders, credit unions, and specialized bridge loan companies often have different requirements than traditional banks.

Step 5: Plan Your Exit Strategy

Lenders want to see a clear plan for how you’ll repay the bridge loan. Be prepared to explain:

Option 1: Selling your current home

• When will you list the property?
• What’s your target list price?
• What’s the average days on market in your area?
• Do you have a real estate agent lined up?

Option 2: Refinancing

• When will you qualify for a traditional mortgage?
• What rate would you expect?
• Would you use this to pay off both the bridge loan and new mortgage?

Option 3: Other sources

• Do you have investments you could liquidate?
• Are you expecting a bonus or inheritance?
• Could you get a conventional loan before the bridge loan expires?

A solid exit strategy reassures lenders and increases your approval odds.

FAQs

How long do bridge loans last?

Most bridge loans have terms of 6-12 months. Some lenders offer shorter terms (3 months) or longer terms (up to 36 months), but these are less common. The typical structure is a 6-month term with an option to extend for an additional 3-6 months if needed (usually with a fee).

Can I use a bridge loan for an investment property?

Yes, many bridge lenders work with real estate investors who need quick financing for rental properties or fix-and-flip projects. However, investment property bridge loans often have:

• Higher interest rates (10-16%)
• Lower loan-to-value ratios (60-70%)
• Stricter requirements on exit strategy
• Different documentation needs

Are bridge loans hard to get approved for?

Bridge loans are generally more difficult to qualify for than traditional mortgages because you are asking the lender to let you carry two home loans at once. In many cases, approval depends heavily on the strength of your collateral, especially your available home equity, rather than solely on your income and other personal financial details.

Approval difficulty factors:

• Your credit score and history
• Amount of equity in current home
• Strength of local housing market
• Your income and reserves
• Whether your home is listed for sale

If you have 20%+ equity and a credit score above 680, approval odds are strong.

Do bridge loans require monthly payments?

Yes, most bridge loans require monthly interest-only payments during the term. This means you only pay the interest charges each month, not any principal. The full principal balance is due at the end of the term as a balloon payment.

Example monthly payment:

• Bridge loan amount: $100,000
• Interest rate: 10% APR
• Monthly interest payment: $833

Some lenders offer deferred payment structures where interest accrues and is paid at the end, but these are less common.

What happens if my home doesn’t sell in time?

This is the biggest risk with bridge loans. If your home doesn’t sell before the balloon payment is due, you have several options:

Option 1: Extension 

Most lenders allow you to extend the term for 3-6 months by paying a fee (usually 0.5-1% of loan amount) and accepting a higher interest rate.

Option 2: Refinance

You could refinance the bridge loan into a traditional mortgage, though this means carrying two mortgages until your home sells.

Option 3: Other funding sources 

Tap into savings, investments, or retirement accounts to pay off the bridge loan while continuing to market your home.

Option 4: Default 

If you can’t repay or extend, the lender can foreclose on your current home. This is the worst-case scenario and should be avoided by having a strong exit strategy from the start.

Is a Bridge Loan Right for You?

Bridge loans solve a specific problem: helping you buy a new home before selling your current one. They work best when you have strong equity (25%+ in your current home), a solid exit strategy, and confidence that your home will sell within 3-12 months.

Consider a bridge loan if:

• You’re in a competitive market where contingent offers get rejected
• Your home is likely to sell quickly (30-60 days average in your area)
• You have at least 20% equity in your current property
• You can afford interest-only payments while carrying both homes
• The cost (9-11% interest) is worth securing your ideal property

Skip bridge loans if:

• You have less than 20% equity
• Your local market is slow (90+ days average sale time)
• You can’t afford two mortgage payments simultaneously
• Lower-cost alternatives (HELOC, home equity loan) are available
• You have time to wait for your home to sell first

Conclusion

Bridge loans can offer valuable flexibility when you are transitioning between homes, but they also carry real financial risk. The short repayment period and higher interest rates mean it is essential to have a clear, realistic plan for selling your current property within the loan term. If that does not happen, you may be stuck with high interest payments, two mortgages, or the need to refinance under pressure. That is the core risk you are accepting.

On the other hand, when you have strong equity, a realistically priced home in a solid market, and a clear plan for listing and selling, a bridge loan can give you an important advantage. It can help you move quickly on a new home, make a stronger offer without a sale contingency, and avoid having to move twice or settle for a less suitable property.

Before moving forward, compare quotes from multiple lenders, confirm how much equity you can actually access, and map out a detailed sale timeline with your real estate agent. If the numbers still work after you factor in rates, fees, and a “what if it takes longer to sell?” scenario, a bridge loan can be the right fit for your situation.