What is a bridge loan for a home purchase?

A bridge loan is a short-term loan (6-12 months) that lets you buy a new home before selling your current one. The loan is secured by your current home's equity and "bridges" the gap between your purchase and your sale. Once your old home sells, you pay off the bridge loan. Bridge loans typically carry rates of 8-10% and origination fees of 1-3 points, but allow you to make non-contingent offers on your next home.

What are the alternatives to a bridge loan?

Alternatives to bridge loans include: (1) HELOC on current home — draw equity to fund down payment, lower rate (8-9%). (2) Cash offer platforms (Knock, Orchard) — they buy your new home cash, you sell old home later. (3) Sale-leaseback programs — sell your current home and rent it back while you shop. (4) Contingency offer — buy with sale contingency (risky in competitive markets). (5) 80-10-10 piggyback — use a second mortgage for down payment. (6) IRA/401k hardship withdrawal (last resort).

How much equity do you need for a bridge loan?

Most lenders require at least 20% equity in your current home to qualify for a bridge loan. The bridge loan typically covers 80% of the combined value of both properties or up to 80% of your current home's equity. Some lenders will go up to 85-90% LTV on bridge loans, but those carry higher rates.

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Need to Buy Before You Sell? Bridge the Gap

Bridge loans let you make a non-contingent cash-like offer on your next home while your current home is still on the market. Compare bridge loan lenders — free, no SSN required.

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Home BuyingUpdated July 6, 2026

Bridge Loan 2026: How to Buy a House Before You Sell

The classic move-up buyer dilemma: you found your dream home, but you cannot afford it until you sell your current home. A bridge loan solves this by unlocking your current home's equity immediately so you can buy without a sale contingency.

Typical Rate

8-10%

Loan Term

6-12 months

Max LTV

80%

Equity Needed

20%+

David Rodriguez

Refinance & Rate Specialist

July 6, 202612 min readExpert

Mortgage RefinancingRate AnalysisMarket Trends

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Quick Answer: How Does a Bridge Loan Work?

A bridge loan is a short-term loan (6-12 months) secured by your current home's equity. It gives you cash for the down payment on your new home before your old home sells. Once you sell the old home, you pay off the bridge loan. You temporarily carry two mortgages plus the bridge loan — for a few months.

Example: Current home worth $600K, mortgage balance $250K. Bridge loan: $180K (at 80% LTV of the equity). Use $180K as down payment on $700K new home. List old home for sale. Sell in 60 days, receive $340K net → pay off bridge loan. Now just one mortgage. Compare bridge loan rates →

Bridge Loan Cost Breakdown (2026)

Cost Component	Typical Range	Example ($200K Bridge)
Interest Rate	8.0-10.0%	$1,333-$1,667/mo
Origination Fee	1-3 points	$2,000-$6,000
Appraisal	$500-$800	$600
Title/Escrow	$500-$1,500	$1,000
Total Upfront Costs	$3,000-$8,300	$7,600
6-Month Interest (8.5%)	Varies	$8,500
Total 6-Month Cost	$11,500-$16,800	$16,100

Is it worth it? If a bridge loan lets you avoid a sale contingency, you may be able to negotiate a better price on the new home or win a competitive offer. In hot markets, saving $10K-$30K on the purchase price easily justifies $16K in bridge loan costs. In slow markets, the math is less clear.

Bridge Loan vs 5 Cheaper Alternatives

HELOC on Current Home (Best Alternative)

⭐ Recommended

If your current home has equity, a HELOC gives you a line of credit at 8-9% — similar to a bridge loan but with lower origination costs and more flexibility. Draw what you need for the down payment. When you sell the old home, pay off the HELOC. Works if you have 2-3 months to get the HELOC approved before making an offer.

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Cash Offer Programs (Knock, Orchard, HomeLight)

🔄 Modern Option

Companies like Knock and Orchard will buy your new home with cash, letting you move in. You then sell your old home. Once sold, you get a traditional mortgage on the new home. Convenience fee: 1-3% of new home price. No bridge loan needed. Best for buyers in markets where these services operate.

Sale-Leaseback on Current Home

🏠 Sell & Stay

Sell your current home to an iBuyer (Opendoor, Offerpad) and lease it back for 1-3 months while you shop for your next home. You get cash from the sale immediately. Then buy your new home as a non-contingent buyer with no time pressure. Convenience cost: typically 5-8% below market value.

Contingency Offer with Escalation Clause

💡 Free Option

Make an offer contingent on your current home's sale. Less competitive in hot markets, but sellers will sometimes accept if you price it right. Use an escalation clause to stay competitive. Works best in slower markets or with motivated sellers.

401k/IRA Loan (Last Resort)

⚠️ Use Carefully

Borrow up to $50K from your 401k (or 50% of vested balance) as a short-term bridge. No credit check. Interest paid back to yourself. Risk: if you lose your job, the loan must be repaid within 60 days or it becomes a taxable withdrawal. Use only as a last resort.

Who Qualifies for a Bridge Loan?

✅ You Likely Qualify If:

• Current home has 20%+ equity

• Current home is already listed or about to be listed

• Credit score 680+ (720+ preferred)

• Stable employment / income

• Can carry two mortgage payments temporarily

• New home is under contract or you have a specific target

❌ Bridge Loan Is Risky If:

• Your current home is in a slow market (may not sell quickly)

• Debt-to-income ratio is already high

• Job is unstable or income varies

• Current home needs repairs before selling

• You cannot afford payments on three loans for 6+ months

• Your credit score is below 660

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