Bridge Loans

Bridge Loans Are Good For:

Bridge loans are a great fit for homeowners who want to buy a new home before selling their current one. They’re especially useful for buyers in competitive markets, families relocating, or anyone with strong home equity looking to avoid making a contingent offer.

How Bridge Loans Work

Once approved, the bridge loan provides funds that can be used for a down payment and closing costs on your new home. After your existing home is sold, the proceeds can be used to pay off the bridge loan. During the loan period, payments may be interest-only or deferred, depending on the program structure.

Key Features

• Short-Term Duration: Typically lasts from a few months to a year.
• Higher Interest Rates: Generally more expensive than traditional loans due to the increased risk for lenders.
• Collateral Requirement: Usually requires collateral, such as real estate or business assets.
• Borrowers must have sufficient equity in their current home and meet credit and asset guidelines. The program may also factor in the monthly obligations of both homes, although some lenders offer flexibility by excluding the departing residence from the debt-to-income ratio if it is listed for sale.

Common Uses

• Real Estate Transactions: Homeowners can use the equity from their current home as a down payment on a new home.
• Business Financing: Companies may use bridge loans to cover operational costs while waiting for long-term funding.