Bridge Loan.

In plain English

A bridge loan is short-term financing that covers the gap between buying a new home and selling your current one. It usually taps the equity in your existing home so you can make a down payment or a non-contingent offer on the next house before the old one closes. These loans are meant to be paid off quickly, often within a year, once your current home sells. They tend to carry higher interest rates and fees than a regular mortgage because they are fast, short, and riskier for the lender.

01Why it matters

A bridge loan can let you move on a house you want without waiting for your current home to sell, but if your old home sits unsold, you can end up carrying two housing payments plus the bridge loan at once.

02The math, step by step

You find a new home but your current one has not sold. You take a bridge loan against your existing home's equity to cover the $50,000 down payment on the new place. When your old home sells two months later, you use the proceeds to pay off the bridge loan. If it had taken eight months to sell, you would have paid the bridge loan's interest and fees that entire time, at the rate your lender set, on top of two mortgages.

03What this is NOT

04Receipts

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