What Is a Bridge Loan
A bridge loan is short-term financing (typically 6 to 12 months) that "bridges" the gap between buying your new home and selling your current one. The lender uses the equity in your current home as collateral. You borrow enough for the down payment and closing costs on the new home. When your current home sells, you repay the bridge loan from the sale proceeds.
Bridge Loan Flow
Current home: Listed, not yet sold, has $200,000 equity.
New home: Found, under contract, need $50,000 down payment + $10,000 closing costs.
Bridge loan: Borrow $60,000 against current home equity.
Timeline: Current home takes 2 to 4 months to sell.
At closing of current home sale: Repay bridge loan from sale proceeds.
The bridge loan lets you go non-contingent on the new home offer, making you competitive in a market where contingent offers are weak.
How It Works (Real Numbers)
Real Numbers Example
Current home: Valued at $350,000, mortgage balance $180,000, equity $170,000.
New home: Found for $400,000, need to close in 30 days.
Problem: You can't sell current home in 30 days. Median days on market is 64. You're stuck.
Bridge loan solution: Get pre-approved for $100,000 bridge loan (60% of current home equity is typical). Close on bridge loan ($100,000 borrowed against current home). Use $60,000 bridge proceeds for down payment ($50K) + closing ($10K) on new home. Close on new home non-contingent (no contingency = stronger offer).
Current home sells 60 days later at $360,000. Sale proceeds: $360,000 minus $180,000 original mortgage minus $100,000 bridge payoff = $80,000 to you.
Net result: You got the new home, didn't have to race to sell current home, pocketed equity.
When a Bridge Loan Makes Sense
Found the right home and the market is competitive. Contingent offers lose. Bridge loans get you non-contingent. Cost? Worth it if the home is what you want.
Specific timeline pressure. Job relocation, school year starting, other deadline. Bridge loans work when timing matters.
Current home will definitely sell but just needs time. You have confidence your current home will sell. You just need 2 to 4 months. Bridge loan covers that gap.
Want to avoid temporary rental. Moving between homes without a bridge loan often means renting temporarily. Bridge avoids that disruption.
Bridge vs HELOC vs Contingent Offer
Three ways to handle this situation.
Comparison: Bridge Loan vs HELOC vs Contingent Offer
Bridge loan: Close in 2 to 4 weeks. Cost: interest-only payments (1 to 2% above mortgage rate, so approximately 7.5 to 8.5% now), origination fee 1 to 2%, title work. Risk: current home doesn't sell on time (rate extends, bridge gets pricey). Best for: non-contingent offer, time pressure, want certainty.
HELOC: Timeline 30 to 45 days to establish (Texas rules). Cost: interest-only, variable rate, lower fees than bridge. Risk: rate can increase, takes longer to establish than bridge. Best for: less urgency, flexibility, want lower rates if they drop.
Contingent offer: Timeline instant (no financing delay). Cost: none. Risk: your offer is weaker, you lose to non-contingent offers. Best for: soft market where contingencies are acceptable (not current Houston).
Recommendation for Houston: Bridge loan if you want the home and can't wait for current home to sell. HELOC if you have more flexibility and rate environment matters. Contingent if you're early in the search and can be patient.
Houston Market Context
Houston has 4.5 months of inventory. Average days on market is 64. That's balanced, not a hot seller's market like 2021, but not a buyer's market either.
Median home price is $335,000. Homes are moving, just at a normal pace. A bridge loan timeline of 6 to 12 months gives you a reasonable margin for current home sale.
If you're coming from a hot market (California, New York) where homes sell in days, Houston feels slow. Bridge loans account for this reality.
Costs and Requirements
Bridge Loan Costs
Interest rate: Typically 1 to 2% higher than conventional mortgages. Current 30-year fixed is 6.36%, so bridge rates run 7.5 to 8.5%.
Monthly payment: Interest-only during the bridge period. On $100,000 at 8%, interest-only = $667/month.
Origination fee: 1 to 2% of bridge amount. On $100,000, that's $1,000 to $2,000.
Points/fees: Title search, appraisal, processing. Typically $1,500 to $3,000 total.
Total upfront cost: Approximately $4,000 to $5,500 to close a bridge loan.
Requirements: Credit 680+. Equity in current home: typically need 20%+ equity to borrow against. Must qualify for both mortgages simultaneously (can you afford the new home payment + bridge payment + old home payment all at the same time?). Current home on market: lender wants evidence home is listed and being shown.
The last requirement is the hidden one: you must qualify for two mortgages at once. That's the underwriting hurdle.
Step-by-Step Bridge Process
Step 1: List your current home.
Step 2: Find your new home and get pre-approval for bridge and new mortgage.
Step 3: Make offer on new home (non-contingent, or contingent on bridge approval).
Step 4: Apply for bridge loan. Lender will order appraisal on current home, verify listing status, confirm equity.
Step 5: Close on bridge loan. Receive funds (minus fees).
Step 6: Close on new home. Use bridge funds for down payment and closing costs.
Step 7: Current home sells (2 to 6 months typically).
Step 8: Repay bridge loan from sale proceeds.
Frequently Asked Questions
What if my current home doesn't sell within the bridge period?
The lender can extend the bridge loan (with additional fees and interest), or you can refinance the bridge into a longer-term loan. It gets expensive. Don't get a bridge loan unless you're confident current home will sell.
How much equity do I need in current home?
Typically 20%+. Lenders don't want to be underwater if current home value drops. On a $350,000 home with $180,000 owed, you have $170,000 equity. You're good. If you're at $330,000 value with $290,000 owed, you have minimal equity. Might not qualify.
What's a typical bridge loan rate?
7.5 to 8.5% now (current mortgages at 6.36%, so +1 to 2%). High because it's short-term and riskier.
How fast can I close on a bridge loan?
7 to 10 days if everything is ready (listing, pre-approval, appraisal). Faster than a standard mortgage because less underwriting.
Can a bridge loan cover investment property?
Some lenders will, many won't. Ask your lender. Residential properties are standard. Investment properties might not be.
Do both the old and new mortgages show on my credit?
Yes. For DTI purposes, both count. If your new mortgage is $2,000, old mortgage is $1,000, and bridge is $700/month, your total housing is $3,700/month. Lenders factor this in.
Timing Solved
Bridge loans are tactical financing. They solve a specific problem: time mismatch between selling and buying. Houston's 64-day average days on market makes this a common issue. When you've found the right home and your current home will sell but needs time, a bridge loan gets you there without contingencies and without renting.
Brandon works with bridge lenders and understands the equities, timing, and qualification requirements. He helps you structure the bridge, coordinate the timing with your current home sale and new home purchase, and guides you through dual mortgage approval. If a bridge loan makes sense for your situation, he executes it cleanly.
Related Resources
- Refinance Houston - Options for your new permanent mortgage
- Conventional Loans Houston - Permanent financing for your new home
- Jumbo Loans Houston - For purchases above conforming limits
- Mortgage Pre-Approval Houston - Get pre-approved for your new purchase
- Houston Housing Market - Current market conditions and trends
Buy Your Next Home Without Waiting to Sell.
Bridge loans let you move on your timeline. Brandon evaluates your equity, structures the financing, and coordinates the closing so you go from one home to the next without a gap. Free consultation, no obligation.
Talk to Brandon About Bridge Financing