How can bridge loans help homebuyers with contingent sales?

Bridge loans let you tap the equity in your current home to fund a down payment or purchase on a new home when your existing house is still on the market. That makes your offer more competitive—especially in markets where sellers prefer buyers without a home-sale contingency—and gives you time to sell without moving twice.

How bridge loans work

  • Structure: A bridge loan is short-term (commonly 6–12 months) and is secured by your current home. Lenders typically expect you to repay the bridge loan when the home sells, via the sale proceeds or a refinance into a permanent mortgage. (See consumer guidance at the CFPB.)
  • Types: Lenders may offer a one-time lump-sum bridge loan, a second mortgage/HELOC-style product, or a combined solution where the new mortgage absorbs the bridge when the sale closes.
  • Collateral and underwriting: Lenders evaluate your existing equity, credit score, income, and the marketability of the home. Expect a second lien in many cases until the sale completes.

Typical terms and costs

  • Term: Usually 6–12 months; extensions are possible but costly.
  • Interest and fees: Bridge loans often charge higher rates than first mortgages and include origination, appraisal, and closing fees. Rates vary by lender and market (commonly higher than conventional mortgage rates). Always compare total cost, not just the headline rate. For a breakdown of closing costs that may apply, see our guide to mortgage closing costs.

Who typically qualifies

Lenders look for:

  • Substantial home equity (often 20%+)
  • Stable income and a reasonable debt-to-income ratio
  • Credit history that supports short-term lending (requirements vary)

Strategies for buyers with contingent sales

  • Start early: Begin lender conversations before you list so you can move quickly when you find a new home.
  • Keep a clear exit plan: Set a realistic sales price, plan for price reductions, and budget three to six months of payments and fees in case the sale takes longer.
  • Use preapproval smartly: Keep your mortgage preapproval active and updated while you pursue a bridge loan—this makes offers stronger. See our article on using a mortgage preapproval letter for practical tips.
  • Compare alternatives: A HELOC or second mortgage can sometimes replace a bridge loan at lower cost—review the trade-offs before committing. Read our comparison of HELOC vs second mortgage for short-term needs.
  • Negotiate payment timing: Some lenders let you pay interest-only on the bridge loan until the sale closes; others require monthly payments. Know the cash-flow impact.

Risks and common pitfalls

  • Double housing payments: If your home doesn’t sell quickly you may carry two mortgages and a bridge loan interest bill.
  • Market risk: A declining market can force a sale at a lower price, squeezing your repayment plan.
  • Added liens and closing complexity: The bridge loan can create subordinate liens or require extra title work.

Real-world example

In my experience advising buyers in competitive markets, a bridge loan has helped clients make non-contingent offers that won bidding negotiations. One client used a short bridge to close on their new home and repaid it six weeks later when their listing closed—avoiding temporary housing and moving costs.

Alternatives to a bridge loan

  • Home sale contingency offers (may be less attractive to sellers)
  • HELOC or second mortgage secured by your current home (often lower cost for some borrowers)
  • Short-term personal loans or borrowing from liquid investments (risky tax and cash implications)

Quick action checklist

  1. Talk to a mortgage lender and ask whether they offer a bridge product.
  2. Get a written plan showing costs, projected monthly payments, and the exit strategy.
  3. Update your preapproval and communicate timing with your listing agent and buyer’s agent.
  4. Compare at least three lenders’ total cost and terms.
  5. Budget for at least 3 months of bridge payments plus closing costs.

Where to learn more

Professional disclaimer: This article is educational and does not replace personalized financial advice. Lenders’ terms and market conditions change—consult a qualified mortgage professional or financial advisor to evaluate your situation.