If you’re buying a new home before selling your current one, you might run into a timing gap. That’s where a bridging loan comes in—a short-term financing option that helps you “bridge” the gap between buying and selling.
What Is a Bridging Loan?
A bridging loan is a temporary loan that gives you access to funds while you’re waiting for your current property to sell. It’s commonly used when:
- You’ve found your next home but haven’t sold your current one yet.
- You need the down payment for the new home before receiving proceeds from your sale.
This type of loan is typically offered by your mortgage lender and is secured against your existing home.
How Does It Work? Here’s a simple breakdown:
- You buy your new home first.
- Your lender provides a bridging loan to cover the down payment or purchase price.
- You sell your current home, and once the sale closes, the proceeds are used to pay off the bridging loan.
Most bridging loans are interest-only and last for a few months—just long enough to complete the sale of your existing property.
What You’ll Need – To qualify for a bridging loan, lenders usually require:
- A firm sale agreement on your current home (or a strong listing).
- Proof of income and ability to carry both properties temporarily.
- A solid credit profile.
Let’s look at the advantages and disadvantages:
Advantage:
- It lets you secure your next home without waiting.
- Avoids rushed selling or temporary housing.
Disadvantage:
- Interest rates may be higher than standard mortgages.
- You’ll need to qualify to carry both homes temporarily.