Loan Products · May 4, 2025
Bridge Loans: Buying Your Next Home Before Selling the Current One
A bridge loan lets you buy your next home without waiting to sell your current one. Here is how they work, what they cost, and when they make sense.
One of the most stressful homebuying scenarios: you have found your next home but have not sold your current one. A bridge loan solves this — at a cost worth understanding.
What Is a Bridge Loan
Short-term financing (typically 6-12 months) secured by your current home that provides funds for your new purchase. It bridges the gap between selling your current home and closing on the new one.
How Bridge Loans Work
Most common structure: the bridge loan pays off your existing mortgage and provides funds for the down payment and closing costs on your new home.
Example: Current home value $450,000, current mortgage $200,000. Bridge loan up to 80% LTV = $360,000. Pays off old mortgage (-$200,000). Available for new purchase: $160,000.
You buy the new home using $160,000 from the bridge plus a new primary mortgage. When your current home sells, the bridge loan is paid off.
What Bridge Loans Cost
Interest rate: typically prime plus 1.5-3% (currently 9.5-12%). Term: 6-12 months. Origination fee: 1-2 points. Interest-only payments during the bridge period.
On $200,000 bridge at 10% interest-only: $1,667/month during the bridge period.
Alternatives to Consider
Contingent offer (weaker in competitive markets), HELOC on current home before listing, or delayed closing coordinated between sale and purchase.
HMS evaluates the right solution for your situation. Call 309-222-8286.