What is a Bridge Loan?
A bridge loan is a short-term loan designed to provide financing during a transitionary period, such as moving from one house to another. Homeowners faced with sudden transitions, such as having to relocate for work, might prefer a bridge loan to help with the cost of buying a new home.
Bridge loans are secured by your current home as collateral, just like mortgages, home equity loans and HELOCs. Bridge loans aren’t a substitute for a mortgage, however. Bridge loans are short-term, designed to be repaid within six months to three years.
How does a bridge loan work?
A tool typically used by sellers in a bind, bridge loans vary widely in their terms, costs and conditions. Some are structured so they completely pay off the old home’s first mortgage at the bridge loan’s closing, while others pile the new debt on top of the old.
Minimum Loan Amount $250,000