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:
When Bridge Financing Is NeededCommon 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
Planning Your Transition?Contact our team to discuss bridge financing options and plan your purchase-and-sale timeline. Bridge Loan CostsInterest RateTypically prime + 2% to prime + 4% Example at prime + 3%:
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 FinancingMust-Have Conditions
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 FinancingOption 1: Your Mortgage LenderIf your new mortgage is with a bank or credit union, they often provide bridge financing:
Option 2: Private LendersIf your mortgage lender won't bridge:
Option 3: Line of CreditIf you have available credit:
Alternatives to Bridge Financing1. Align Your Closing DatesStrategy: Negotiate both closings for the same day or close together. Challenge: Requires cooperation from all parties. 2. Sale with Extended ClosingStrategy: Sell your home with a longer closing period. Benefit: Gives time to find and close on new home first. 3. Rent-Back ArrangementStrategy: Sell your home but rent it back from the buyer temporarily. Benefit: Stay in current home until new one is ready. 4. HELOC Before SellingStrategy: Set up HELOC on current home before listing. Benefit: Access equity without formal bridge loan. Bridge Financing PitfallsWhat 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.
Plan Your Transition
We'll help you structure purchase and sale timing to minimize bridge financing costs.
