To get a bridge loan, you generally need at least 20 percent equity in your current home, a credit score of 680 or higher, and enough income to carry payments on both properties at once. From there, the path is to assemble financial and property documents, pick a lender whose funding speed matches your timeline, and go through underwriting and closing — a process that runs anywhere from a few days with a private lender to a few weeks with a bank.
What You Need to Qualify
Equity is the foundation. Lenders use your current home as collateral, so the ownership stake you hold directly limits what you can borrow. Twenty percent is the usual minimum.
The specific sizing rule is loan-to-value. Bridge loans are typically capped at 80 percent of your current home’s appraised value, meaning your existing mortgage balance plus the new bridge loan cannot exceed that figure combined. If you owe $200,000 on a home appraised at $400,000, you could potentially borrow up to $120,000.
Debt-to-income matters almost as much. Lenders add your current mortgage payment, the projected bridge loan payment, and your other monthly debts, then measure that total against your gross monthly income. Keeping the ratio under 50 percent makes approval easier, and lower ratios tend to produce better terms.
Credit score sits alongside those two. Most lenders want a FICO of at least 680. Scores above 720 generally unlock lower rates.
Documents to Gather Before You Apply
Before you submit anything, pull together the paperwork that lets the lender verify your finances and assess both properties.
- A current mortgage payoff statement from your servicer, showing exactly what you owe. This sets how much equity is actually available.
- A recent professional appraisal of your current home, or the listing price if the home is already on the market, so the lender can calculate loan-to-value.
- The signed purchase agreement for the new home, which tells the lender the price, expected closing date, and any contingencies.
- Federal tax returns from the previous two years and pay stubs covering the last 30 days.
- Bank statements from the preceding two months, showing liquid reserves for down payment, closing costs, or carrying costs if the current home takes longer to sell than expected.
- The legal description of your current property, found on your most recent property tax statement or deed.
One item often trips up applicants: the exit strategy. Lenders want a clear written explanation of how the bridge loan will be repaid, which almost always means the sale of your current home. Include the anticipated listing price, your agent’s marketing timeline, and a backup plan if the property doesn’t sell within the loan term. Precise figures pulled from the payoff statement and the purchase agreement make this section more credible and reduce the chance of a rejection during underwriting.
Where to Get a Bridge Loan
Bridge loans come from two main sources, and the trade-offs between them are significant.
Banks and Credit Unions
Traditional institutions offer lower interest rates and lower origination fees, but underwriting is stricter and the process is slower. These lenders are regulated under federal consumer protection laws, including the Truth in Lending Act, which requires clear disclosure of the annual percentage rate, all fees, and the total cost of the loan before you sign.1Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosures Many banks prioritize existing customers who already hold a mortgage or deposit relationship with the institution.
Private and Hard Money Lenders
Private lenders focus heavily on the collateral rather than your personal credit profile, which makes them a workable option for borrowers who don’t meet a bank’s credit or income thresholds. The cost is higher: expect higher interest rates and more origination points. These lenders aren’t subject to the same federal oversight as banks, though they must still comply with state lending and fair-practice laws.
Funding Timelines
Speed is often the deciding factor. Bank-originated bridge loans generally take two to four weeks from application to funding. Private lenders can sometimes deliver funds within 48 to 72 hours on straightforward deals, though one to two weeks is more typical. If you’re competing for a home in a fast-moving market, funding speed may matter as much as the rate.
How the Application and Closing Work
Once your documents are organized, submit the complete package through the lender’s online portal or in person. The lender will order appraisals on both your current home and the property you’re buying to confirm the loan-to-value ratios. Underwriting follows, usually one to two weeks, as the lender verifies income, assets, existing debts, and title on both properties.
After final approval, you move to closing. You’ll sign the loan documents at a title company office or in front of a notary, confirming the repayment terms, interest rate, and the lender’s remedies if you don’t repay on time. Funds are then wired to the escrow account for the new home purchase, or in some cases directly to you to cover a down payment and immediate costs.
The lender records a lien against your current home at closing. That lien stays in place until the bridge loan is fully repaid, usually from the proceeds when the current home sells.
What a Bridge Loan Costs
Bridge loans are more expensive than conventional mortgages on almost every measure. Budget for three categories of cost.
Interest rates generally fall between 8 and 12 percent, depending on your credit, the lender type, and market conditions. For comparison, the current prime rate is 6.75 percent, and bridge loans typically sit several percentage points above that benchmark.2Board of Governors of the Federal Reserve System. H.15 – Selected Interest Rates
Origination points are charged at closing. One point equals one percent of the loan amount. Banks typically charge 1 to 1.5 points. Private lenders commonly charge 1.5 to 3.
Total closing costs usually run 1.5 to 3 percent of the loan amount, covering the appraisal, title search, recording fees, and administrative processing. On a $150,000 bridge loan, that works out to roughly $2,250 to $4,500.
Because the loan is short-term, those upfront costs are spread over months rather than years, which pushes the effective cost well above what the dollar figures alone suggest.
Bridge loan interest may be deductible if the loan qualifies as home acquisition debt and you itemize, subject to the $750,000 cap on total home acquisition debt for mortgages taken out after December 15, 2017 ($375,000 if married filing separately).3Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction Points follow their own rules, and appraisal and notary fees are not deductible as interest.4Internal Revenue Service. Topic No. 504, Home Mortgage Points A tax professional can confirm what applies to your situation.
How Repayment Is Structured
Bridge loans don’t amortize over 15 or 30 years. They typically run six to twelve months, with some lenders offering terms as short as three months or as long as three years. Within that window, you’ll usually choose from three repayment formats.
Interest-only payments keep monthly obligations low. You pay only the interest each month, then repay the full principal in a lump sum when your home sells.
Deferred payments give you breathing room during the overlap. The lender adds the interest to the loan balance each month, and you pay nothing until the loan matures, at which point the entire balance — principal plus accumulated interest — comes due in one payment from the sale proceeds.
Partial principal plus interest works like a compressed traditional mortgage. Monthly payments chip away at principal alongside interest, which reduces the balloon but raises the monthly cost.
Which structure fits depends on cash flow. Interest-only payments produce the lowest total interest if you can comfortably carry two properties. Deferred payments ease monthly strain but produce a larger final payment.
Risks Before You Sign
The core risk is simple: your current home might not sell before the bridge loan matures. Several things can go wrong from there.
- If you can’t repay by the maturity date, the lender can declare default and begin foreclosure on the property securing the loan. You could lose the home.
- Until the original home sells, you may be carrying three payments at once: the existing mortgage, the bridge loan (unless deferred), and the new mortgage. A few months of overlap can strain even solid finances.
- If the lender forecloses and sells for less than the loan balance, you may owe the difference depending on your state’s deficiency judgment laws.
- A drop in home values can shrink your equity below what you anticipated, leaving less net from the sale than planned.
Extensions are possible if the house doesn’t sell in time, but they aren’t guaranteed. The lender must agree, and extensions often come with added fees or a higher rate.
Watch the prepayment language in your contract. Federal regulations exclude bridge loans with terms of twelve months or less from the definition of a “higher-priced mortgage loan,”5eCFR. 12 CFR 226.35 – Prohibited Acts or Practices in Connection With Higher-Priced Mortgage Loans which means the federal restrictions on prepayment penalties that apply to longer-term, higher-priced mortgages do not apply to most bridge loans. Whether yours carries a prepayment penalty depends entirely on what the lender puts in the contract. Some lenders charge a fee if you pay off earlier than expected, which is an odd outcome given that fast repayment is the entire point of the product.
Cheaper or Safer Alternatives
A bridge loan isn’t the only way to buy before you sell. Depending on your timeline, another route may cost less or carry less risk.
Home Equity Line of Credit
A HELOC lets you borrow against your current home’s equity on a revolving basis. Rates recently averaged around 7 to 8 percent, versus 8 to 12 percent for bridge loans, and you only pay interest on what you actually draw. Setup takes several weeks, so it works if you plan ahead rather than scramble for a specific property.
Home Equity Loan
A home equity loan delivers a lump sum at a fixed rate, repaid over a set period. Rates are usually lower than bridge loan rates, and the fixed payment makes budgeting easier. Approval timelines are similar to a HELOC, slower than a bridge loan, and you’ll carry the debt alongside the new mortgage until the sale closes.
Contingent Sale Offer
A sale contingency makes your offer on the new home conditional on selling your current one first, typically within 30 to 90 days. If the sale falls through, you walk away without penalty, and the cost compared to a bridge loan is zero. The downside is competitiveness: in a hot market, sellers often prefer non-contingent offers. Some accept contingencies with a kick-out clause, which lets them take a better offer later and gives you 24 to 72 hours to drop the contingency or step aside.
The right choice depends on how fast you need to move, how confident you are the current home will sell quickly, and how much cushion you have to absorb overlapping payments.