What a bridge loan does
A bridge loan lets you use the equity in your current home to buy the next one before the first sells. It is short-term, usually 6 to 12 months, and repaid in one lump sum from the sale proceeds.
How much you can borrow
Lenders typically allow up to 80% of your current home’s value, minus your existing mortgage:
Bridge amount = home value × maximum LTV − mortgage balance
Some loans also roll the old mortgage into the bridge loan, in which case the amount is larger but so is the interest.
Worked example
Your home is worth $400,000 and you still owe $150,000. The lender allows 80% LTV at 9.5% interest, with 2% fees, and you expect to sell within 6 months.
- Maximum: 400,000 × 0.80 − 150,000 = $170,000.
- Interest-only payment: 170,000 × 9.5% ÷ 12 = $1,345.83 per month.
- Interest over 6 months: $8,075.
- Fees: 2% × 170,000 = $3,400.
- Total cost: $11,475.
- If the interest is deferred and compounds monthly instead, it would come to about $8,237.
Costs to expect
- Interest rates a few points above a 30-year mortgage.
- Origination fees of about 1.5 to 3% of the loan.
- Appraisal, title and closing costs, sometimes similar to a full refinance.
- While both homes are yours, you may also carry two mortgages, two sets of property taxes and insurance.
Risks
The biggest risk is that your home sells later or for less than planned. Interest keeps running, and at the end of the term you may need an extension or a refinance. Before signing, check:
- How long homes like yours take to sell in your area.
- What happens if the term ends before the sale.
- Whether you qualify for the new mortgage while still carrying the old one.
Alternatives
- Home equity line of credit (HELOC) opened before you list, often cheaper.
- Sale contingency in your offer, if the seller accepts it.
- Rent-back agreement after selling, so you can stay while you buy.
- Buy-before-you-sell programs offered by some lenders and brokers.
This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.