A short-term loan that helps homebuyers purchase a new home before selling their existing one.
Full Definition
A bridge loan provides short-term financing to 'bridge' the gap between buying a new home and selling the current one. They're typically interest-only loans with terms of 6–12 months and higher interest rates than conventional mortgages. Bridge loans use the equity in the borrower's current home as collateral. Once the existing home sells, the borrower uses proceeds to pay off the bridge loan and the new home's mortgage. They're especially useful in competitive markets where buyers can't make a contingent offer. Bridge loans carry risk — if the existing home doesn't sell quickly, the borrower may struggle to service both the bridge loan and the new mortgage simultaneously.
Related Terms
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