A bridge loan is short-term financing secured by the equity in the property you still own, giving you cash for the down payment or full purchase of a new property now — so you don't have to wait for the current one to sell. When it sells, the proceeds pay off the bridge loan. You pay a premium (higher rate, points, usually interest-only over a short term) for the ability to act without a sale contingency. It rewards a clear, near-term exit and punishes a vague one.
Timing is the classic real-estate trap: the building you want is available now, but your capital is locked in the property you're selling. A bridge loan solves the sequencing — it lets you buy first and sell second. Here's how the structure works for owner-occupants and investors, and how to use it without getting caught.
How It Works
A lender advances short-term funds secured by the equity in your current property (sometimes cross-collateralized with the new one). You use that cash for the down payment or the full purchase of the new property and close without waiting on your sale. The bridge loan runs interest-only over a short term — usually months — and is repaid in full when the old property sells. In effect, you're borrowing against tomorrow's sale proceeds to act today.
Who Uses It
- Businesses relocating or upgrading an owner-occupied facility that need the new building before the current one sells.
- Investors rolling equity from one asset into the next without waiting on a sale to close.
- Buyers who want a non-contingent offer to win a competitive deal — removing the "subject to sale" clause makes an offer far stronger.
The common thread: real equity in a current property and a credible, near-term plan to sell it. For the broader decision, see when to use a commercial bridge loan.
What It Costs
Bridge financing is priced for speed and short duration: higher interest rates, points/fees, and interest-only payments, plus the possibility of briefly carrying both properties until the sale closes. Because the term is short, the total dollar cost can still be modest relative to the opportunity — but the rate is not cheap, so the math depends on a quick exit. Speed matters; see how fast you can close a commercial bridge loan.
The Risks — and How to Manage Them
The whole structure hinges on the exit. If your current property takes longer to sell, or sells for less than expected, you carry the bridge (and maybe two payments) longer than planned. Manage it by:
- Using a realistic valuation and timeline for the property you're selling — not a hopeful one.
- Keeping a cushion for carrying costs if the sale slips a month or two.
- Lining up a backstop — e.g., refinancing the bridge into permanent financing — in case the sale takes longer.
Next Step
If the deal you want won't wait for your sale, a bridge loan keeps you in the game — just go in with a clear exit. Get matched with bridge lenders who can move quickly. See also what lenders look for in a bridge loan.