How bridge loans work for buying before you sell

Jeana Beech
Aug 15
2 min read

For many homeowners, the dream scenario is to buy a new home before selling the current one. But how do you afford the down payment without having the equity from your old home in hand? This is where a bridge loan can help.

What Is a Bridge Loan?

A bridge loan is a short-term loan that “bridges” the gap between buying your new home and selling your old one. It gives you access to your home’s equity before the sale closes, so you can move forward with your purchase without waiting.

How It Works

Loan Amount – Based on your current home’s equity and value.
Term Length – Usually 6–12 months (some lenders offer up to 24).
Repayment – You can often defer payments until your old home sells, then pay off the loan in full from the sale proceeds.

Key Benefits

Buy without selling first – Secure your dream home before it’s off the market.
Stronger offers – Make a non-contingent offer, which is more attractive to sellers.
More time to move – Avoid the rush of selling and buying at the same time.

Risks and Considerations

Higher interest rates – Bridge loans often cost more than traditional mortgages.
Two mortgages temporarily – If your home doesn’t sell quickly, you may be paying both loans for a while.
Fees and closing costs – Some lenders charge origination fees, appraisal fees, or other upfront costs.

Example Scenario

Current home value: $400,000
Current mortgage balance: $200,000
Available equity: $200,000
Bridge loan: $100,000 for the new home’s down paymentAfter selling your old home, you use the proceeds to pay off the bridge loan in full.