A residential bridge loan generally costs between 8% and 12% in annual interest, plus 1% to 3% of the loan amount in origination fees and several hundred dollars in standard closing costs. On a $200,000 bridge loan held for six months, that works out to roughly $10,000 to $15,000 in total out-of-pocket expense. Where you land in that range depends on your credit, how much equity sits behind the loan, the lender you pick, and how long the loan stays open before your old home sells.
Interest Rate Range
Interest is the biggest variable in the total bill. Bridge loan rates in 2026 generally run from about 8% to 12% annually, well above a conventional 30-year mortgage. Some lenders quote the rate as a spread over the prime rate instead. With prime at 6.75% in early 2026, a 2- to 3-point spread puts the effective rate at roughly 8.75% to 9.75%, which lines up with the middle of the broader range.
Rates are quoted annually but calculated monthly. On a $200,000 loan at 9%, that’s $1,500 a month in interest alone, before any principal, fees, or taxes are added in.
Origination Points and Closing Costs
Bridge loans are front-loaded with fees that hit at closing. The largest is the origination fee, quoted in “points” where one point equals 1% of the loan amount. Residential bridge loans commonly charge 1 to 3 points. On a $300,000 loan, a 2-point origination fee costs $6,000 before you’ve paid a dollar of interest.
The rest of the closing costs look much like a conventional mortgage:
- Appraisal fee: roughly $315 to $425, with a national average around $360.
- Title insurance and escrow fees: a few hundred to over a thousand dollars, depending on location.
- Processing and underwriting fees: several hundred dollars in administrative charges for document prep, credit checks, and loan review.
- Recording fees: set by state and local governments and highly variable.
Many lenders will let you roll these fees into the loan balance instead of paying out of pocket. The catch is that you then pay interest on them for the full term. A $7,000 fee package rolled into a 9% loan for six months tacks on about $315 in extra interest.
How Repayment Structure Changes the Bill
Most bridge loans require interest-only payments during the term. You aren’t paying down principal each month, just covering the interest while you wait for the old home to sell. That keeps monthly payments manageable at a point when you may be carrying two properties.
Some lenders offer deferred interest instead, with no monthly payments at all. Interest accrues and gets added to the principal, and the whole thing is paid off in a single balloon when the old home sells. It sounds easier, but you end up paying interest on interest, which quietly inflates the total.
Loan terms typically run six to twelve months, with some lenders stretching to three years. The term controls total interest. That same $200,000 loan at 9% costs $9,000 over six months and $18,000 over a full year. Every extra month on the loan is real money.
Minimum Interest and Prepayment Penalties
Fine print can erase the savings you’d expect from a quick sale. Some lenders include a minimum interest guarantee, so even if the home sells in month two, you owe interest for the full six or twelve months stated in the contract. Others charge a prepayment penalty of 1% to 2% of the balance for paying off early. A few impose lockout periods where early repayment isn’t allowed at all.
Not every lender writes these terms in, and they’re often negotiable. Read the loan documents carefully before closing. A loan you planned to carry for three months can end up costing nearly as much as a six-month loan if a minimum interest clause is buried in the contract.
A Realistic Cost Example
Concrete numbers make the picture easier. Take a homeowner with a $500,000 home, a $200,000 existing mortgage, and a $200,000 bridge loan at 9% with a 2-point origination fee, held for six months:
- Origination fee (2 points): $4,000
- Interest (6 months at 9%): $9,000
- Appraisal, title, and miscellaneous closing costs: about $1,500
- Total: roughly $14,500
That $14,500 is about 7.25% of the loan amount, spent in six months. If the home takes a full year to sell, interest alone doubles to $18,000 and the total climbs past $23,000. Rolling closing costs into the loan pushes the effective principal to $205,500 and nudges the monthly interest charge up a bit further. The speed of the sale is the single biggest factor in what you actually pay.
What Pushes Your Rate Up or Down
Lenders price for risk, and a few variables move the number meaningfully.
Credit score sets the floor. A score of 740 or above tends to earn the best rates and may shave half a point off the origination fee. Most lenders want to see at least a 680 to qualify at all. Below that, expect a denial or a steep bump in pricing from a private lender.
Loan-to-value ratio matters just as much. A loan at 60% LTV gives the lender a thick equity cushion, so pricing is more favorable than at 80% LTV, where even a modest dip in the home’s value puts the lender at risk. Most bridge lenders cap combined LTV at 80%, so you need at least 20% equity in your current home.
Property type shifts the rate too. Loans against investment properties or fix-and-flip projects carry higher rates than loans against a primary residence, because the lender is pricing in market and construction risk. Bridging to a new primary home while your current one sells is the lowest-risk scenario.
The lender you pick introduces the widest spread. Banks and credit unions tend to offer lower rates but move slowly and apply stricter qualification standards. Private lenders and specialty mortgage companies can close in days instead of weeks, and they charge for the speed with higher rates and more points. Shopping at least three lenders is the most effective single step for cutting total cost.
What It Costs If the Home Doesn’t Sell
The scenario that turns a bridge loan from expensive to dangerous is a slow sale. If your current home hasn’t sold by the maturity date, your options all have a price tag.
Most lenders will offer an extension, but not for free. Expect another fee, often structured like the original origination charge, and possibly a higher interest rate for the extended period. Some contracts spell out the extension terms; others leave them to negotiation when the clock runs out.
If an extension isn’t available or isn’t affordable, the lender can accelerate the loan and demand the full balance. Nonpayment triggers default, and because the loan is secured by your home, the lender’s ultimate remedy is foreclosure. Default interest rates run far above the contract rate. One court case upheld a default rate of 4% per month on a bridge loan, enough to wreck a household budget quickly.
Before signing, price out the backup plan. Carrying costs on two properties, a possible price reduction on the old home, and extension fees all belong in the budget.
Can You Deduct the Interest?
Bridge loan interest may be tax-deductible, which can offset some of the cost, but the rules are specific. Under the IRS’s home mortgage interest rules, interest is deductible when the loan is a secured debt on a qualified home and the proceeds are used to buy, build, or substantially improve that home. The deduction is capped at $750,000 in total mortgage debt ($375,000 if married filing separately) for loans taken after December 15, 2017.
A bridge loan secured by your current home and used to purchase a new primary residence can qualify as deductible acquisition indebtedness. The IRS treats a mortgage as acquisition debt if you buy a home within 90 days before or after taking out the loan, even when the loan is technically secured by a different property.
Your existing mortgage, bridge loan, and new mortgage all count against the $750,000 cap combined. If total debt is higher, only interest on the first $750,000 is deductible. You also have to itemize on Schedule A, which limits the benefit for many taxpayers. A tax professional can run your actual numbers.
Cheaper Options Worth Comparing
A bridge loan isn’t the only way to buy before you sell, and it often isn’t the cheapest.
A home equity line of credit taps the same equity at a typically lower rate and with more flexible repayment. You pay interest only on what you draw, with no balloon tied to the sale. The timing catch: most lenders won’t open a HELOC once your home is already listed, so you have to plan ahead.
A sale contingency makes your purchase offer conditional on your current home selling first. There’s no extra financing and no two-property carry. In a seller’s market, contingent offers often lose out to unconditional ones. In a slower market, a contingency costs nothing and removes the financial risk entirely.
Some buyers tap a short-term 401(k) loan for the down payment on the new home, though that carries its own risk if you leave the job before repaying. The right pick depends on how competitive your local market is and how quickly your current home is likely to move.