What Is a Bridge Loan?
Timing a home sale and a home purchase to close on exactly the same day rarely works out perfectly in practice. A bridge loan exists specifically to solve that timing gap.
The Problem a Bridge Loan Solves
Many buyers need the equity from selling their current home to help fund the purchase of their next one, but sellers rarely want to make an offer contingent on their own home selling first — it makes the offer less competitive. A bridge loan lets you access some of your current home’s equity before it sells, giving you funds to move forward on the new purchase without that sale contingency.
How Bridge Financing Typically Works
A bridge loan is generally secured against the equity in your current, not-yet-sold home, and provides funds you can put toward the down payment or purchase of your new home. Once your current home sells, the proceeds are typically used to pay off the bridge loan. Because it’s meant to be short-term, terms are usually structured very differently from a standard 15- or 30-year mortgage.
Do I Have to Qualify With Both Mortgage Payments?
Depending on the specific structure and lender, you may need to demonstrate the ability to carry payments on both your current mortgage and the new one, at least temporarily, until your current home sells. Some bridge loan structures are designed to minimize this burden, but it varies by lender and loan program, so it’s worth discussing your specific numbers directly.
Alternatives Worth Considering
A bridge loan isn’t the only way to solve this timing problem. Some buyers instead use a HELOC on their current home, negotiate a rent-back arrangement with their new home’s seller, or in some cases qualify to carry both payments without a specialized bridge product. Which option makes sense depends on your equity, your income, and how much timing flexibility you actually need.
Frequently Asked
What is a bridge loan?
A bridge loan is short-term financing that lets you access equity in your current home before it sells, so you can move forward on purchasing a new home without waiting for your existing sale to close first.
Can I buy a new house before I sell my current house?
Yes, using tools like a bridge loan, a HELOC on your current home, or qualifying to carry both mortgage payments temporarily, depending on your financial situation and the lender's guidelines.
Is a bridge loan the same as a HELOC?
No, though they can serve a similar purpose. A bridge loan is typically a short-term loan specifically structured around the sale of your current home, while a HELOC is an ongoing line of credit that isn't tied to a pending sale.
Have Questions About Your Situation?
Every borrower’s situation is different. Talk to a Coltrain Mortgage loan officer to see how this applies to you.
Find Your Loan Officer Call (631) 851-4420