Can I use a bridge loan to buy a property before I sell my current one?
Yes, a bridge loan can finance a new property before your current one sells, typically by lending against the equity in the property you are selling, the one you are buying, or both, at 65 to 75 percent of combined value. Expect 8 to 12 percent interest only for six to twelve months, paid off from the sale proceeds.
The three structures
| Structure | How it works | Best when |
|---|---|---|
| Cross-collateralized | One loan secured by both properties; the sale pays it down or off | You have strong equity in the property being sold |
| Equity loan on the current property | A second or new first mortgage on the property you are selling funds the down payment | The new purchase gets its own permanent loan |
| Bridge on the new property only | The purchase is financed at 65 to 75 percent; you refinance into a permanent loan after the sale | The current property has a loan you cannot touch |
Ranges vary by lender.
What it costs
On a $500,000 bridge held six months at 10 percent with 1.5 points, interest is $25,000 and points are $7,500, plus closing costs of a few thousand. Compare that with the cost of losing the purchase or selling your current property under pressure. Many lenders build an interest reserve into the loan so you are not making two mortgage payments from cash during the overlap.
What the lender wants to see
- The listing agreement or a realistic plan to list the current property, with comps supporting the price.
- Enough combined equity that the lender is covered if the sale takes longer.
- Reserves or an interest reserve for the expected overlap plus a cushion.
- Credit around 650 or better and clean recent housing history.
The main risk
The sale takes longer than planned. A bridge loan that matures before the old property closes triggers extension fees, typically a quarter to a half point per extension, and if the property does not sell the lender expects a refinance or a price cut. Ask for a term that covers a slow market: twelve months is safer than six.
Business-purpose only
A bridge loan from a business-purpose lender is for investment property. If the property you are buying is your primary residence, the loan falls under consumer rules and most bridge lenders will not make it. Investor-to-investor bridges are the common case.
A cleaner alternative
If the new property qualifies for a DSCR loan on its own, take the DSCR loan on the purchase and a smaller bridge or equity loan on the old property for the down payment. That leaves you with a permanent loan already in place and only the down-payment piece to pay off from the sale.
How CommFi handles it
Our lending desk looks at both properties and prices the cheapest structure that gets you to closing. It funds direct when it fits, and when the deal needs a lender comfortable with cross-collateral, the desk searches a database of 7,000+ lenders and the ones that fit compete for it. Zero upfront fees.
Related reading
Related questions
- How much can I borrow on a bridge loan to buy before selling?
- Typically 65 to 75 percent of the combined value of the property you are selling and the one you are buying.
- What if my current property does not sell before the bridge loan matures?
- Most lenders offer extensions for a fee. If the sale stalls entirely, you refinance into a permanent loan or reduce the price.
- Do I make payments on the bridge loan during the overlap?
- Interest only, and many lenders fund an interest reserve from the loan so the payments are made from it.
- Can I use a bridge loan to buy my primary residence before selling?
- Usually not from a business-purpose bridge lender. Those loans are for investment property.
- Is a HELOC cheaper than a bridge loan for this?
- Often, if you can get one in time. A HELOC on an investment property is hard to obtain, and it cannot be opened in the middle of a sale.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.