Most buyers have to sell before they can buy. A bridge loan flips that order: it lets you close on a new home before the old one sells by borrowing against the equity you've already built. The concept is simple. The execution has a few moving parts worth understanding before you commit.
What a Bridge Loan Actually Is
A bridge loan is a short-term loan secured against your current home's equity. It covers the down payment on your new home while your existing home is still listed or under contract. The expectation is that it gets paid off when the old home sells, which is typically within six to twelve months.
Bridge loans are offered by banks, private lenders, and some mortgage brokers. Not every lender offers them, and not every borrower qualifies. You'll typically need strong equity in your current home and solid credit to get one.
How the Numbers Work
The amount you can borrow is based on the equity in your current home. A common formula: lenders will advance up to 80% of the combined appraised value of both properties minus your existing mortgage balance.
Here's a concrete example: if your current home is worth $400,000 and you owe $200,000, you have $200,000 in equity. That equity becomes the collateral for the bridge loan. Understanding how lenders calculate usable equity is the same math that applies here.
While you're carrying the bridge, you're paying two sets of debt: your current mortgage and the bridge loan. Your lender will qualify you on both, so your income and debt picture needs to support it. That's a different calculation than a standard purchase, and your debt-to-income ratio needs to clear both obligations.
When It Makes Sense
Bridge loans work best when you have substantial equity in your current home, a strong expectation of a quick sale, and a specific property you'd lose without acting fast. In a competitive Florida market, the ability to make a non-contingent offer can be the difference between getting a home and losing it to another buyer.
If speed is what you need on the new purchase, it helps to know your closing timeline before you start. A fast lender on the new loan matters just as much as the bridge itself. Jordan has closed loans in as few as 5 days. Most clients close well ahead of the industry average.
The Risks Worth Thinking Through
If your current home takes longer to sell than expected, you're carrying two loans for an extended period. Bridge loan rates run higher than primary mortgage rates, and there are closing costs on both loans.
If the market shifts and your home doesn't sell at the expected price, you could be stretched. The downside scenario is manageable if your equity is strong, but it's worth running the numbers on the worst case before you commit. A cash-out refinance or HELOC may accomplish something similar with less exposure in lower-urgency situations.
At 14 Days To Close, we can walk you through the real numbers on a bridge loan situation, including what you'd qualify for on both sides and what the timing looks like. The conversation takes about 20 minutes.
