Definition
A bridge loan is short-term financing that lets a homeowner tap into the equity of their current home before it sells, in order to buy or move into the next one without waiting on a sale to close first. It's typically secured by the home you still own and comes with higher interest rates and fees than a standard mortgage, reflecting its short duration and added risk. Homeowners use bridge loans to avoid the stress of trying to time two closings perfectly, or to make a stronger, non-contingent offer on a new home. The trade-off is real: you're carrying two properties' worth of debt at once until your original home actually sells.
Example
Priscilla found her dream retirement home before her current house had even hit the market, and she worried she'd lose it waiting on a traditional sale to close first. She took out a bridge loan against her existing home's equity to cover the down payment on the new place, then sold her old home four months later and paid off the bridge loan in full from the proceeds. It let her move on her own timeline instead of losing the new house to a competing buyer with fewer strings attached and a faster closing. The higher interest rate on the bridge loan stung for those few months, and she carried two sets of payments briefly, but she felt it was worth it to secure a home she otherwise might have lost entirely. Her old home eventually sold to a cash buyer who closed quickly once she was ready, which helped her pay off the bridge loan sooner than she'd originally budgeted for. Priscilla said the short-term cost was easily worth the peace of mind of never having to juggle two closings at once.