Loans
Bridge Loan
A short-term loan that helps homeowners finance the purchase of a new home before selling their current one. Bridge loans typically have terms of six months to one year and higher interest rates than traditional mortgages. They can be helpful in competitive markets where you need to make an offer quickly, but they carry risk if your current home takes longer to sell than expected.
Why It Matters
Bridge Loan is a concept every mortgage borrower should understand before signing loan documents. The terms of your mortgage — including factors like bridge loan — directly determine your monthly payment, total interest paid, and financial flexibility for the next 15-30 years. Taking time to understand these terms puts you in a stronger negotiating position with lenders.
When evaluating loan offers, ask your lender to explain how bridge loan affects your specific loan scenario. Get it in writing on your Loan Estimate form, and compare how different lenders handle bridge loan — the differences can save or cost you thousands over the life of your mortgage.
Real-World Example
For a typical $300,000, 30-year mortgage at 6.5%, understanding bridge loan can help you evaluate whether you're getting the best possible terms. Even small variations in loan terms translate to significant dollar amounts over 360 monthly payments.
Pro Tip
Before your loan closes, make sure you fully understand how bridge loan works in your specific mortgage. Ask your loan officer to walk through it — they're required to explain every term on your Closing Disclosure.