A bridge loan solves a common real estate problem: you’ve found your next home but haven’t sold your current one. Rather than lose the deal or carry two full mortgages indefinitely, a bridge loan taps your existing home equity to fund the down payment and closing costs on the new property — then gets paid off when the old home sells.
How a Bridge Loan Works
The mechanics depend on your lender, but the most common structure works like this:
- You own a home worth $400,000 with a $200,000 mortgage balance (50% equity)
- You find a new home to buy for $500,000
- A lender issues a bridge loan for up to 80% of your current home’s value minus your existing mortgage balance: ($400,000 × 0.80) − $200,000 = $120,000 bridge loan
- You use the $120,000 for the down payment and closing costs on the new home
- You carry both the bridge loan and the new mortgage simultaneously
- When your current home sells, you pay off the bridge loan from the proceeds
Bridge Loan Costs in 2026
| Cost Component | Typical Range |
|---|---|
| Interest rate | 8%–12% |
| Origination fee | 1%–3% of loan amount |
| Appraisal fee | $500–$800 |
| Title/escrow fees | $1,000–$2,000 |
| Total cost on $200K loan for 6 months | $10,000–$16,000 |
Worked example: $150,000 bridge loan at 10% interest for 8 months
- Monthly interest: $150,000 × (10%/12) = $1,250/month
- 8 months of interest: $10,000
- Origination fee (2%): $3,000
- Total cost: ~$13,000
How Much You Can Borrow with a Bridge Loan
Most lenders will lend up to 80% of the combined value of your current and new homes, minus any existing mortgage:
| Your Home Value | Existing Mortgage | Max Bridge Loan (80% LTV) |
|---|---|---|
| $300,000 | $100,000 | $140,000 |
| $400,000 | $150,000 | $170,000 |
| $500,000 | $200,000 | $200,000 |
| $600,000 | $0 | $480,000 |
Qualifying for a Bridge Loan
Bridge loans have tighter requirements than conventional mortgages:
- Credit score: 620 minimum; 700+ for best rates
- Equity: Most lenders require 20%+ equity after the bridge loan
- DTI: Must qualify while carrying both mortgages simultaneously
- Current home listed: Many lenders require active listing or a purchase contract
- Income documentation: Full income verification (W-2s, tax returns)
Pros and Cons of Bridge Loans
| Pros | Cons |
|---|---|
| Buy new home before selling current | High interest rates (8–12%) |
| Access equity without waiting to sell | Origination fees 1–3% |
| Faster than HELOC in many cases | Risk of carrying two mortgages if home doesn’t sell |
| Can make non-contingent offer (stronger) | Short repayment window (6–12 months) |
| Avoids moving twice | Limited lender options |
3 Alternatives to Bridge Loans
1. HELOC (Home Equity Line of Credit)
If you have at least 20% equity, a HELOC provides a credit line you can draw on for the down payment. Rates in 2026 range from 8–10% — similar to bridge loans — but HELOC origination costs are typically lower. The main limitation: HELOC approval takes 2–6 weeks, which may be too slow for competitive markets.
2. Contingent Purchase Offer
Make your offer on the new home contingent on selling your current home within a specified period (typically 30–60 days). Sellers may prefer non-contingent offers, but this protects you from carrying two mortgages. In slower markets, contingent offers are frequently accepted.
3. 80-10-10 Piggyback Loan
Buy the new home with 10% down and take a simultaneous HELOC for 10% — avoiding PMI and a bridge loan. This works best if your credit supports two simultaneous loan applications and you have the 10% available for the initial down payment.
A bridge loan is a short-term solution — once you sell your existing home, you typically roll into a standard mortgage. For the long-term loan options after the bridge, see mortgage loan types. If you need equity before the sale and have time, a HELOC is usually a lower-cost alternative. For the dollar cost of carrying two loans versus waiting, see true cost of a mortgage rate difference.
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