{"id":16315,"date":"2024-07-12T08:00:46","date_gmt":"2024-07-12T15:00:46","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=16315"},"modified":"2025-04-24T09:22:05","modified_gmt":"2025-04-24T16:22:05","slug":"buyer-bridge-loan","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-bridge-loan\/","title":{"rendered":"I Want to Buy a New House. Do I Have to Get a Bridge Loan?"},"content":{"rendered":"

You wake up one morning and realize you\u2019re facing a similar situation as a lot of other people \u2014 your family has expanded, but your house has stayed the same size. Kind of like in Alice in Wonderland<\/em>, when Alice eats the cookie in the White Rabbit\u2019s house and grows until she\u2019s bursting out of it. Time to move!<\/p>\n

But you have a problem: Without a ton of cash in the bank<\/a>, you won\u2019t have the funds to buy a new house until you sell your current one<\/a>. There has to be a way out of this, right?<\/p>\n

There is. And you\u2019re not alone \u2014 when financing a home purchase, 53% of repeat buyers<\/a> reported using funds from the sale of a primary residence to upgrade to their new home. There are a few different solutions, and one of those is a bridge loan.<\/p>\n

A bridge loan<\/a> is probably the best-known method for getting the rates and terms on the mortgage that you want without having to sell your current house first<\/a>. Best of all \u2014 if you\u2019ve found your next dream home, you don\u2019t have to convince the seller to wait until you\u2019ve sold your current home. But there are some drawbacks, and possibly a better option out there for you than a bridge loan. Here\u2019s what you need to know.<\/p>\n

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\n \"homelight\n <\/div>\n \n

Find a Top Agent With Experience in Bridge Loans<\/h3>\n

Partner with a top agent who knows your local market and has experience with bridge loans or “buy before you sell” programs. HomeLight can connect you with an experienced buyer’s agent who can help you navigate your entire buy-sell journey.<\/p>\n \n

\n Get Started<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n
<\/div><\/p>\n

How bridge loans work<\/h2>\n

Bridge loans are short-term loans secured with your existing home\u2019s equity<\/a>; you can then use the funds as a down payment<\/a> for the house you\u2019re looking to buy.<\/p>\n

Short-term is the key here: bridge loans typically have terms between six months and a year<\/a>. They are intended to be repaid as soon as you sell your current home<\/a>, and they are also referred to as interim loans, gap financing, or \u201cswing\u201d loans.<\/p>\n

The idea behind bridge loans is that they \u201cbridge\u201d the gap between when a homebuyer needs money and when they have it in the bank. You could think of these loans kind of like payday loans, only with a more forgiving interest rate.<\/p>\n

However, because of their short-term nature and the risk factor, interest rates<\/a> on bridge loans tend to be higher than mortgages. You\u2019ll also likely have to pay an origination fee.<\/p>\n

Typically, a bridge loan is paid off in one lump sum or \u201cballoon payment,\u201d either as soon as the funds from the sale of the current house are available, or at the end of the loan term. \u201cYou can tap the equity of your current home before you\u2019ve sold it,\u201d explains top-selling Omaha agent Don Keeton<\/a>, who works with 75% more single family homes than the average agent in his area.<\/p>\n

Here are three examples of how a bridge loan could work. (Note: These are simply hypotheticals to illustrate how the bridge loan could work and don\u2019t take into account the interest payments and fees you would pay on an actual bridge loan.)<\/p>\n

Example #1: Say your current home is worth $200,000, and you have $100,000 in equity<\/a>. You find a home that you want to buy that costs $300,000, and you want to put down $60,000, or 20% \u2014 but you don\u2019t have any savings, and you haven\u2019t sold your home yet. You can take out a bridge loan for $60,000 and buy your new house. Then, when your old house sells, you can use the $100,000 you make from the sale (minus your fees for selling a house<\/a> \u2014 closing costs, interest) to pay off the bridge loan. You should also have some money left over since you didn\u2019t use the entire $100,000 to pay off the bridge.<\/p>\n

Example #2: Your current home is worth $300,000, and you have $90,000 in equity. Your new home costs $450,000, and you want to put down 20%, or $90,000. That\u2019s the full amount of your equity \u2014 but you really want this house. You can take out a bridge loan for the full down payment amount of $90,000. When your old house sells, you use the proceeds<\/a> to pay back the $90,000 bridge loan. The only difference in this scenario is that you wouldn\u2019t have money left over from the proceeds since you used all of your equity to buy the new house \u2026 in fact, with the interest you\u2019ll have to pay on the bridge loan, you\u2019ll owe money at the end of the day.<\/p>\n

Example #3: Your current home is worth $120,000 and you have $72,000 in equity. The new home you\u2019ve found costs $250,000. A 20% down payment is $50,000, which should be no problem with $72,000 in equity available. You take out a bridge loan for $50,000 to purchase the new house. When the old house sells, you pay off the bridge loan for $50,000 and are left with $22,000 from the equity in your old home (minus your expenses \u2014 closing costs, interest, and fees).<\/p>\n

Starting to make sense?<\/p>\n

\u201cIf you go to a seller and say, \u2018Would you wait until I sell my house?\u2019, in today\u2019s market<\/a>, they\u2019ll probably say \u2018No,\u2019\u201d says Keeton. \u201cA bridge loan is a way for you to take control of that house so you don\u2019t lose it to another buyer.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Thinking of upgrading to a bigger home but lacking a down payment? You may not have to wait to tap into your home\u2019s equity; a bridge loan is one of many options.<\/p>\n","protected":false},"author":160,"featured_media":45606,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[192,629,632],"tags":[767],"class_list":["post-16315","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-for-buyers","category-home-financing","category-mortgage-loans","tag-what-is-a-bridge-loan"],"acf":[],"yoast_head":"\nI Want to Buy a New House. Do I Have to Get a Bridge Loan?<\/title>\n<meta name=\"description\" content=\"Thinking of upgrading to a bigger home but lacking a down payment? 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