Bridge financing solves a common real estate timing problem: you want to buy your new home before your current one sells. This guide explains how bridge loans work, what they cost, and when they make sense.
What Is Bridge Financing?
A bridge loan is short-term financing that "bridges" the gap between buying your new home and receiving funds from selling your current one.
How It Works
Timeline example:
| Date | Event |
|---|---|
| March 1 | Your new home closes (you need funds) |
| March 15 | Your current home closes (you receive funds) |
| Gap | 14 days—bridge loan covers this period |
The loan covers:
- Down payment for new home
- Closing costs
- Any gap between purchase and sale proceeds
When Bridge Financing Is Needed
Common Scenarios
| Scenario | Bridge Needed? |
|---|---|
| Sale closes before purchase | No |
| Purchase closes before sale | Yes |
| Same-day closing | Usually no |
| Sale has conditions | May need bridge |
Why Timing Gaps Happen
- Seller of new home requires fast closing
- Buyer of your home needs extra time
- New home is a builder completion
- Unexpected delays in your sale
Planning Your Transition?
Contact our team to discuss bridge financing options and plan your purchase-and-sale timeline.
Bridge Loan Costs
Interest Rate
Typically prime + 2% to prime + 4%
Example at prime + 3%:
- Prime rate: 5.00%
- Bridge rate: 8.00%
- $200,000 bridge for 30 days
- Interest cost: $200,000 × 8% × (30/365) = $1,315
Additional Fees
| Fee Type | Typical Amount |
|---|---|
| Administration fee | $200 - $500 |
| Legal fees | Included in purchase legal |
| Appraisal (if required) | $0 - $400 |
Total Cost Example
| Component | Amount |
|---|---|
| Interest (30 days on $200K) | $1,315 |
| Admin fee | $300 |
| Total bridge cost | $1,615 |
For short-term financing, this is reasonable—but longer gaps become expensive quickly.
Requirements for Bridge Financing
Must-Have Conditions
- Firm sale on current home - Conditions must be removed
- Firm purchase on new home - All conditions satisfied
- Known closing dates - Both dates confirmed
- Acceptable equity position - Equity available to bridge
Qualification Factors
| Factor | Requirement |
|---|---|
| Credit score | 600+ (varies by lender) |
| Sale status | Firm and unconditional |
| Maximum term | Usually 90-120 days |
| Maximum amount | Varies—often up to $500K |
Where to Get Bridge Financing
Option 1: Your Mortgage Lender
If your new mortgage is with a bank or credit union, they often provide bridge financing:
- Seamless integration with mortgage
- Often lowest rates
- Single point of contact
Option 2: Private Lenders
If your mortgage lender won't bridge:
- More flexible qualification
- Higher interest rates
- Faster approval
- May bridge larger amounts
Option 3: Line of Credit
If you have available credit:
- Use existing HELOC or credit line
- No new application
- Interest only on what you use
Alternatives to Bridge Financing
1. Align Your Closing Dates
Strategy: Negotiate both closings for the same day or close together.
Challenge: Requires cooperation from all parties.
2. Sale with Extended Closing
Strategy: Sell your home with a longer closing period.
Benefit: Gives time to find and close on new home first.
3. Rent-Back Arrangement
Strategy: Sell your home but rent it back from the buyer temporarily.
Benefit: Stay in current home until new one is ready.
4. HELOC Before Selling
Strategy: Set up HELOC on current home before listing.
Benefit: Access equity without formal bridge loan.
Bridge Financing Pitfalls
What Can Go Wrong
| Risk | Consequence |
|---|---|
| Your sale falls through | Bridge loan becomes expensive or impossible |
| Longer delay than expected | Interest costs mount |
| Insufficient equity | May not qualify for full amount needed |
| Closing cost surprises | Bridge may not cover everything |
How to Protect Yourself
- Don't remove conditions on purchase until sale is firm
- Build buffer into bridge amount
- Have backup financing plan
- Work with experienced real estate lawyer
FAQ
Q: Can I get bridge financing if my sale is still conditional?
A: Usually no—lenders require a firm, unconditional sale before providing bridge financing.
Q: What if my sale closes late?
A: You may be able to extend the bridge loan, but interest continues to accrue. Delays are expensive.
Q: Is bridge financing available for investment properties?
A: Yes, though requirements may be stricter and rates higher.
Q: Can I use bridge financing for a down payment on a pre-construction condo?
A: Typically no—bridge loans are for imminent closings, not deposits years in advance.
Q: What's the maximum bridge financing term?
A: Usually 90-120 days. Longer terms may require alternative financing.
What's Next
Planning a purchase before your sale closes? Talk to our team early—we'll help you structure the timing and financing to minimize bridge costs.
Ready to Get Started?
Contact us today for personalized mortgage advice and competitive rates.
