Bridge Loans

What is a Bridge Loan?

A bridge loan is a short-term loan that uses the equity in your current home to help fund the down payment and closing costs on your new home. Once your existing home sells, the proceeds are used to pay off the bridge loan.

Bridge loans usually require interest-only payments and are loans that are meant to be paid back within a matter of months, rather than years. They are sometimes called “swing loans” or “gap financing” because they bridge the financial gap between the selling of one home and the buying of the next.

When a Bridge Loan Makes Sense

A bridge loan can be a strong tool in a competitive housing market when timing doesn’t line up perfectly. It can allow you to move quickly on a new home without waiting for your current home to close.

Situations in which a bridge loan would be a good fit include:

You want to write a stronger offer without a home-sale contingency
You’ve found your perfect home but your current home hasn’t sold yet.
You have significant equity in your existing home and a reasonable expectation it will sell in the near term

How a Bridge Loan Works

With a bridge loan, a lender considers the value of your current home and what you still owe on it, to determine how much equity is available. You then borrow against that equity to cover some or all of the down payment on your new home.

Most bridge loans will mandate that your current home be listed for sale and will have a specific payoff deadline, often tied to the sale of that property. The bridge loan is then paid off from your sale proceeds, and you continue with your regular mortgage on the new home.

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Benefits of a Bridge Loan

This flexibility can help alleviate some of the stress associated with trying to coordinate two closings on the same day. If you find your next home today, but the money you need for the down payment is tied up in the equity of the home you’re selling. A bridge loan can provide temporary financing until that home sells.

Ability to buy before you sell, so you don’t miss out on a home you love
Make a stronger offer on your next home purchase, as you may be able to make an offer without a home-sale contingency, which can be more attractive to a seller.
Access to equity that might otherwise be locked in your current home until closing

Important Considerations and Risks

Because they are short-term and more specialized, bridge loans may carry higher interest rates and fees than long-term mortgages. Depending on the structure of the loan, you might also face a period in which you have to make payments on your existing mortgage and the bridge loan.

There’s also market risk: if your current home takes longer to sell or sells for less than expected, your exit strategy may need to be adjusted. An experienced mortgage advisor can walk through different what-if scenarios so you understand the payment, timing, and risk profile before moving forward.

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 Trustindex verifies that the original source of the review is Google. I can not say enough good things about Educated Mortgage. We had the pleasure of working with Dan and Heidi. From the beginning conversations with Dan to the loan application to the processes with Heidi all the way up through the closing, the experience was beyond exceptional. Communication with us very efficient and they worked very hard for us. Our situation was extraordinary and definitely presented challenges but they never gave up on us. We actually spoke with Dan several months prior to this and he gave us advise on things we needed to work on, which we did and when we called him back he was ready to go to work for us. Even after the closing, he will watch our loan and mortgage rates and let us know if and when the time could be right to refi. They are there for you from the beginning and we will still be there months or years down the road to help. Even if it is just to ask some questions. Educated Mortgage is just amazing.
  
 
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 Trustindex verifies that the original source of the review is Google. It was out second time with Educated Mortgage and it went  as smooth as first time.Dan and Heidi were great explaining things and keeping us informed.We  refinanced out home,took care of some credit card and student loan debt  and enough for a tree removal.and our mortgage is still affordable.we recommend  them highly.Al and Peggy Sheets

Is a Bridge Loan Right for You?

A bridge loan tends to work best for homeowners with solid equity, good credit, and a realistic plan to sell their current home. If your situation involves limited equity or a highly uncertain sale timeline, other tools such as a home equity loan, HELOC, or simply selling first may be better options.

Educated Mortgage can help review your home value, remaining mortgage balance, and purchase goals to see if a bridge loan fits your strategy. Together you can compare the costs, risks, and alternatives so you can move into your next home with confidence.