September 1, 2025
Bridge financing helps homeowners buy their next property before the sale of their current home closes. A bridge loan is a short-term, interest-only advance that covers the confirmed equity you’ll unlock when your existing home sale completes. Lenders require a firm, unconditional purchase contract for your current property (with set possession date and no outstanding conditions) and a purchase agreement for the new property. Because the loan is repaid from your sale proceeds, the term is usually just a few days to a few weeks—long enough to close on the new place and move out before your sale completes.
How is the loan amount calculated? Start with your firm sale price, subtract the mortgage payout and selling costs (legal fees, realtor commissions, adjustments), and the remainder is your net equity. Lenders will typically advance up to that confirmed equity to fund your new down payment and closing costs. Interest is charged only for the days you use the funds and is often collected at funding or from sale proceeds. Expect a one-time setup or administration fee plus legal and disbursement costs. Because it’s short-term and unsecured by a separate charge, pricing is higher than standard mortgage rates, but the total cost is usually modest given the short duration.
Eligibility hinges on documentation and timing. You’ll need: a firm sale agreement, new purchase agreement, current mortgage statement, proof of insurance, and your lawyer’s details so funds can be coordinated between transactions. Without a firm sale, most mainstream lenders won’t offer bridge financing. In those cases, alternatives include setting up a secured line of credit well in advance, or aligning possession dates to close both transactions the same day. Work closely with your mortgage broker and lawyer to match closing dates, confirm payouts, and ensure your down payment isn’t double-counted between files.
When does bridge financing make sense? It solves the “buy first, sell later” challenge—letting you move once, carry both homes briefly, and avoid rushed possession. The key is planning: confirm your sale is firm, keep your debt picture stable until both deals close, and budget for the short-term interest and fees. Done correctly, a bridge loan can turn a stressful timeline into a smooth move—without tapping high-interest credit or missing out on the right home.
Source: Absolute Mortgage Team