What Is a Bridge Loan? 2026 Guide for Homebuyers and Homeowners

A bridge loan is a short-term loan that “bridges” the gap between two transactions — most commonly helping a homeowner buy a new home before their current home has sold. Bridge loans give buyers the flexibility to act quickly in competitive markets without needing to time the sale of their current home perfectly with the purchase of the next one.

How a Bridge Loan Works for Homebuyers

When you want to buy a new home but have not yet sold your current one, a bridge loan uses the equity in your existing home as collateral to fund the down payment (or even the full purchase price) of the new home. Once your current home sells, you pay off the bridge loan with the proceeds.

Example:

Current home value: $400,000, mortgage balance: $200,000, equity: $200,000
New home purchase price: $500,000, requires $100,000 down payment
Bridge loan: $100,000 secured against your current home’s equity
You close on the new home, move in, then sell your old home and repay the bridge loan

Bridge Loan Terms and Costs

Bridge loans are significantly more expensive than standard mortgages:

Interest rate: Typically 2% to 4% above the prime rate or a conventional mortgage rate — often 8% to 12%+ in 2026
Loan term: 6 to 12 months, sometimes up to 24 months
Origination fees: 1.5% to 3% of the loan amount
Repayment: Usually interest-only payments during the term, with full balance due at maturity (balloon payment)
Minimum equity required: Most lenders require at least 20% equity in the existing property after accounting for the bridge loan

Two Common Bridge Loan Structures

Structure 1: Lump Sum, Full Payoff at Sale

You receive the bridge loan proceeds at closing on your new home. No monthly payments are required during the bridge period. The full balance plus accrued interest is due when your old home sells. This is the simplest structure.

Structure 2: Two-Loan Structure

Some lenders combine the bridge loan with your new home mortgage into a single package. This can simplify paperwork and underwriting but requires working with the same lender for both loans.

Who Offers Bridge Loans?

Bridge loans are available from:

Traditional banks and credit unions (harder to find; many large banks have exited the bridge loan market)
Mortgage companies and private lenders
Hard money lenders (typically higher rates)

Supply has tightened in recent years — bridge loans are less commonly offered than they were in the 2010s. Work with a mortgage broker who specializes in these products to find current lenders.

Alternatives to a Bridge Loan

Contingency Sale Offer

Make your offer on the new home contingent on the sale of your current home. Many sellers will not accept this in competitive markets, but it eliminates bridge financing risk entirely.

Home Equity Line of Credit (HELOC)

If you have substantial equity in your current home, a HELOC can serve the same purpose as a bridge loan at a lower cost. Set it up before you list your current home (while you still meet income requirements). Draw on it for the new home down payment, then repay it when the old home sells. HELOCs typically carry much lower rates than bridge loans.

80-10-10 Loan (Piggyback Mortgage)

A first mortgage at 80% LTV, a second mortgage at 10% LTV, and a 10% down payment out of pocket. Avoids PMI without requiring 20% down. Does not require selling your current home first.

Renting Current Home Instead of Selling

If your cash flow allows, renting your current home rather than selling creates rental income that can service the new mortgage payment. Long-term this may be more profitable than selling, depending on the market.

Risks of Bridge Loans

High cost: If your home takes longer to sell than expected, interest on a bridge loan at 10%+ adds up quickly
Two mortgage payments: During the bridge period, you may carry payments on both your old mortgage and your new one simultaneously
Home may not sell: If your old home does not sell within the bridge loan term, you may face a balloon payment you cannot make — potentially forcing a fire sale or loan default
Market timing risk: Buying before selling means you own two properties if the market slows or your old home does not appraise at the expected value

Is a Bridge Loan Right for You?

A bridge loan makes sense when:

You need to move quickly on a new home purchase and cannot time the sale of your current home
Your current home has strong demand and a realistic 30-90 day sale timeline
You have substantial equity in your current home
The cost of the bridge loan is justified by the gain on the specific new home opportunity (e.g., a below-market deal that will not last)

It is generally not the right choice if your current home is in a slow market, if you are financially stretched, or if a HELOC is available at substantially lower cost.

Bridge Loan FAQ

Can I get a bridge loan with bad credit?

Bridge loans are primarily asset-based — lenders focus on the equity in your property more than your credit score. Borrowers with credit challenges may still qualify, though rates will be higher. Hard money lenders are more flexible on credit but charge the highest rates.

How quickly can a bridge loan close?

Faster than a traditional mortgage — bridge loans from private lenders can close in 5 to 14 days. Bank-issued bridge loans typically take 2 to 4 weeks.

Do I need to make payments on a bridge loan?

Structure varies. Some bridge loans defer all payments until maturity (full balance plus accrued interest due at once). Others require monthly interest-only payments. Confirm the payment structure with your lender before signing.