A bridge loan, also called interim financing or bridge financing, allows you to pay for your next home before completing the sale of your current home. We say it’s a bridge loan because you’re “bridging” the gap between your purchase and sale.
Bridging could be a solution if your dates don’t align between the home you sell and the home you buy. You’ll need to weigh the costs versus benefits because the rates are typically higher for bridging compared to traditional mortgages.
On the other hand, if you value the convenience of moving in early, it may be well worth the additional loan costs. Maybe you want to do home improvement projects or take your time moving before you officially move out.
Bridging is a short-term loan based on the equity you have tied up in your home sale. You get access to that equity before the sale is completed. But It’s not a mortgage and goes hand in hand with your sale. You apply for and get approved for your mortgage totally separately, independently of the bridge.
If you know upfront bridging is a good option, it’s best to get prequalified before you sell. Once you have a firm offer on your home, you’ll finalize the bridge loan application.
