Definition
A short-term loan that lets a homeowner buy a new home before the current one sells, using the equity in the existing house as collateral. It typically carries a higher rate and more fees than a mortgage and is repaid in a lump sum when the old home closes.
Why it matters
Bridge loans solve a timing problem in a competitive market, letting you make an offer without a sale contingency, but the cost is real: a stretch of carrying two mortgages plus the bridge, and serious trouble if the old house takes longer to sell than expected.
Example
A family with $150,000 of equity in a $400,000 home takes a $100,000 bridge loan at 9% to cover the down payment on a $500,000 house. Interest runs about $750 a month; the old home sells four months later, and they repay the $100,000 plus roughly $3,000 of interest and a $2,000 origination fee.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.