A bridge loan is a form of short-term financing that can cover the gap between buying a new home and selling your current one.
While bridge loans are used in a variety of fields, in the real estate market they usually provide cash for a down payment or closing costs. Bridge loans can also be used to pay off your old mortgage, flip a house or supplement renovation financing.
They usually have higher interest rates and shorter terms and, since they use your house as collateral, you risk foreclosure if you can't pay the full amount when the time comes.
What is a bridge loan?
Unless they're first-time homebuyers, most people use the proceeds from the sale of their current property to buy their new one.
If you haven't found a buyer yet, a bridge loan can cover your down payment or closing costs until you do.
Also known as swing loans, gap loans or interim financing, bridge loans have shorter terms than a traditional mortgage: Usually, they must be repaid within six months or a year, although some lenders offer terms of up to three years.
Bridge loans are often offered by credit unions and regional banks, which may stipulate that borrowers use them for their purchase mortgage, as well.
Unlike traditional mortgages, bridge loans aren't covered by the Real Estate Settlement Procedures Act (RESPA), which protects consumers from predatory lending practices.
How does a bridge loan work?
A bridge loan is a form of short-term financing for borrowers who are ready to make an offer on their new home but haven't found a buyer for their current property yet.
The loan is usually large enough to cover both the remaining balance on your existing mortgage and the down payment on the new house.
If a borrower needs to use a bridge loan to finance a down payment on their new home, they'll take out a smaller loan and use it as a second mortgage on their new home.
You can take out a bridge loan to just help with a down payment or closing costs, or take out a larger loan to cover the balance on your existing mortgage as well as a down payment on your new home.
Lenders look for stable employment and a steady income among other requirements.
Typical bridge loan requirements
| Credit score | 620 to 740 |
| Debt-to-income ratio | 50% |
| Loan-to-value ratio | Up to 80% |
| Home equity | 20% |
A couple with $100,000 left on their current mortgage is ready to move. They list their house for $300,000 and put in an application for a new place that costs $500,000.
Since they haven't closed on the sale of their old house yet, they take out a 12-month bridge loan for $100,000 to cover the 20% down payment for the new house.
Three months later, their old place sells and they use the proceeds to pay off the balance on their existing mortgage and their $100,000 bridge loan (plus any accrued interest).
How much does a bridge loan cost?
Bridge loans are usually more expensive than other forms of financing. In November 2024, interest rates on bridge loans ranged between 7% and 10%, compared to 6.81% for a conventional mortgage and 8.41% for a home equity loan.
Closing costs on bridge loans are about 1.5% to 3% of the total loan
Bridge loans vs. traditional loans
There are several key differences between bridge loans and traditional mortgages.
Rates and fees: Bridge loans usually have higher rates and fees than traditional home loans.
Term length: Bridge loans are meant to cover a transition period, not act as a permanent financing solution. A conventional mortgage has a term of 10 to 30 years, while a bridge loan is usually for just 6 to 36 months.
Payment: A fixed-rate mortgage has steady monthly payments that incorporate a portion of the principal plus interest. With a bridge loan, borrowers typically make interest-only payments during the term and have a balloon payment when it ends.
Timeline for funding: Approval for a bridge loan can take as little as 72 hours with funding available in under two weeks. That's compared to the 43-day average for closing on a mortgage.
| Bridge loan | Purchase mortgage | |
|---|---|---|
| Term | Six months to a year | 10 to 30 years |
| Time to fund | Up to two weeks | 41 days, on average |
| Closing fees | Typically 1.5% to 3% of loan total | Typically 0.5% to 1% of loan total |
| Repayment structure | Interest-only payments through the term with full repayment due at the end | Steady monthly payments that includes interest and principal over the loan term |
Who offers bridge loans?
One of the most challenging aspects of securing a bridge loan is finding lenders who offer them.
Guild Mortgage
Guild Mortgage Bridge Loans
Rates
Apply online for personalized rates
Terms
6 months
Maximum LTV
85% for purchase and 100% for construction
Minimum loan size
$40,000
Maximum loan size
$300,000
San Diego-based Guild Mortgage only offers a loan term of six months, but its flexible credit score and down payment requirements earned it spots on our lists for both the best mortgage lenders and the best lenders for an FHA loan.
- Loans amount: $40,000 to $300,000
- Terms: 6 months
- Loan-to-value ratio: 85% for purchase and 100% for construction
- Availability: Not available in New York or Texas
Malve Capital
Malve Capital LLC Bridge Loans
Rates
Rates start at 8%; apply online for personalized rates;
Terms
3 to 24 months
Maximum LTV
85% for acquisition and 100% for construction
Minimum loan size
$50,000
Maximum loan size
$5 million
If you need cash quickly, Malve Capital claims it can close on a bridge loan in as little as five business days. There's no minimum credit requirement and terms of as long as 24 months are available.
- Loan amount: $50,000 to $5 million
- Terms: 3 months to 24 months
- Loan-to-value ratio: 85% for purchase, 100% for construction
- Availability: Not available in Alaska, Hawaii, Montana, Nevada, North Dakota, Oregon, South Dakota, Utah or Vermont.
CoreVest
CoreVest Finance Bridge Loans
Rates
Apply online for personalized rates
Terms
6 to 24 months
Maximum LTV
85%
Minimum loan size
$75,000
Maximum loan size
$50 million
CoreVest is one of the few lenders to offer bridge loans nationwide, including a unique revolving credit bridge loan.
- Loan amounts: $75,000 to $50 million
- Terms available: 6 months to 24 months
- Loan-to-value ratio: 85% for purchase
- Availability: Nationwide
When a bridge loan makes sense
Here are a few cases when you might consider using a bridge loan. Whatever your reason, you need to be confident your old house will sell before payment is due
You need money for closing costs: The most common use for a bridge loan is to pay for closing costs on a new home while waiting for the previous house to sell. You can also take out a loan big enough for a down payment or two pay off your old mortgage.
Your renovation loan doesn't cover all your expenses: A bridge loan can cover the remaining costs of remodeling or upgrading and increase your home's value. When the renovation is done, you can refinance using the house's new appraised value and pay back the loan.
You're flipping a house: You can use the money to cover the costs of construction or renovation, and then use the proceeds from the sale to repay the loan.
Pros and cons of a bridge loan
- Can cover closing costs or down payment until your current home is sold
- Fast closing
- Interest-only payments until term is due
- High rates and short repayment term
- Usually requires at least 20% equity
- Borrowers often required to also use the lender for their new mortgage
- Can lose your house if you fail to make payments
Alternatives to bridge loans
If you don't want to take on the risk, bridge financing isn't your only option.
1. HELOC
A home equity line of credit (HELOC) is a revolving line of credit secured by your home's value. Unlike the 12 months you usually get to repay a bridge loan, you have a 10-year window to draw funds, followed by a 20-year repayment period.
A HELOC can take longer to fund than a bridge loan (three to six weeks), so it's only a good alternative if you have enough time to close on the loan.
2. Home equity loan
Like a HELOC, a home equity loan taps the value of your house as collateral for a loan — in this case, one comes in a lump sum. Home equity loans usually have a fixed rate and terms of 20 or 30 years. As with a bridge loan and HELOC, a lender can foreclose if you fail to make payments.
Two of our top picks for home equity loans are Rocket Mortgage, which lends up to 90% of the value of your home, and TD Bank, which accepts lower-than-normal credit scores.
Rocket Mortgage Home Equity Loan
Annual Percentage Rate (APR)
Apply online for personalized rates
Loan minimum and maximum
Minimum: $45,000; Maximum: $500,000
Terms available
10, 20 years
Credit needed
680
Minimum equity required
10%
TD Bank Home Equity Loan
Annual Percentage Rate (APR)
Apply online for personalized rates
Loan minimum and maximum
Minimum: $10,000; Maximum: $500,000 without additional requirements
Terms available
5 to 30 years
Credit needed
660
Minimum equity required
10%
3. Piggyback mortgage
With a piggyback mortgage, also known as an 80-10-10 loan, you take out a primary mortgage for 80% of the purchase price. At the same time, you take out a second mortgage for another 10% of the sale price and put another 10% down in cash. This allows you to forego private mortgage insurance but, , unlike a bridge loan, you'll have to start making payments immediately.
4. Personal loan
A personal loan is not secured, so there's no risk of losing your home. But rates tend to be higher and borrowing limits are lower. You can use a personal loan to help with closing costs but most lenders won't let you use it for a down payment. You'll also have to start making payments immediately.
Bridge loan FAQs
What is a bridge loan?
A bridge loan is short-term financing that allows a borrower to purchase a new home before they've sold their current one. The most common use of a bridge loan is to cover closing costs, but it can also go toward a down payment or to pay off your old mortgage. Full repayment is usually due within six months to a year.
Are bridge loans a good idea?
Bridge loans can be a good idea if you're confident your previous home will sell within the allotted term. If it doesn't, however, you could face foreclosure if you don't have the means to repay the loan when it comes due.
Who offers bridge loans?
Bridge loans are more often offered by regional banks and credit unions than big national lenders. We've chosen Guild Mortgage and Malve Capital as good options for a bridge loan.
How quickly can you get a bridge loan?
Some lenders will approve bridge loan funding in as little as 24 or 72 hours, but it can take up to two weeks to receive the money. That's still shorter than a traditional mortgage, which can take more than 40 days, and a home equity loan, which can take anywhere from two weeks to two months.
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