What is a Bridge Loan?

A bridge loan or bridge financing is used to bridge a timing gap between the closing date of your new home and your current home.

Key points:

• This is usually a short-term loan of 30 days or less.

• Typically, you must have a signed purchase agreement for the sale of your current home to be approved for bridge financing.

• Typically, the lender providing your new mortgage will offer a bridge loan so confirm they do bridge financing before you commit.

What do we mean by the timing gap?

To illustrate the point, let's look at a homeowner named Sally who is selling her home and the sale closes on September 30th.

Sally has found a new home but a condition for buying it is that it must close before September 20th!

Problem:

Sally wants the new place, but she needs the equity from her current home to help pay for the new home.

Solution:

She asks, for 10 days of bridge financing equivalent to the equity in her current home so that she can complete the purchase of the new home.

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