Yes, banks do offer bridging loans, but they are not common products and most banks have strict rules about who can get one

A bridging loan is a short-term loan that covers a gap between two events — usually the purchase of a new home before you have sold your current one. The bank lends you money for a few weeks or months, and you repay it once the sale of your old home closes and you have the cash.

Not all banks offer bridging loans. The ones that do — typically larger banks and some credit unions — treat them as specialty products for people in specific situations. You will need a strong credit history, proof that you already have a buyer for your current home, and often a down payment saved for the new purchase. The interest rates are higher than a standard mortgage because the bank is taking on more risk for a shorter period.

Bridging loans are not the same as a home equity line of credit or a personal loan. They are designed specifically for real estate transactions and require documentation that proves both the sale of your old home and the purchase of your new one are already in motion.

Key Takeaways

  • Bridging loans are offered by some banks and credit unions, but availability varies by location and lender.
  • You will need proof that your current home is under contract to sell and that you have an offer accepted on a new home.
  • Interest rates on bridging loans are higher than standard mortgages because the loan is short-term and carries more risk for the lender.
  • Most bridging loans last between one and six months, and you repay them in full once your home sale closes.
  • If your home sale falls through, you are still responsible for repaying the bridging loan on the agreed schedule.

How a bridging loan actually works

The process starts before you explore. You need to have already made an offer on a new home that has been accepted, and your current home needs to be listed for sale or already under contract with a buyer. The bank will not lend you money based on a hope that you will sell — they need proof that a sale is in progress.

When you explore, you will provide the purchase agreement for the new home, the listing or sales contract for your current home, and documentation of your income and credit history. The bank calculates how much to lend based on the expected sale price of your current home, minus any remaining mortgage balance. They do not lend the full amount — there is usually a gap of 10 to 20 percent to protect themselves if the sale price drops or closing costs are higher than expected.

Once approved, the bank deposits the bridging loan funds into your account. You use this money to make the down payment and cover closing costs on the new home. You do not make monthly payments during the loan period. Instead, when your old home sale closes and you receive the proceeds, you repay the entire bridging loan balance in one lump sum, plus interest.

What banks look for when you explore

Banks treat bridging loans as higher-risk products, so the approval process is stricter than for a standard mortgage. Your credit score typically needs to be 680 or higher, though some lenders require 700 or above. A lower score does not automatically disqualify you, but it will mean higher interest rates if you are approved.

The bank will also verify your income and employment history. They want to see that you have stable income and a track record of paying debts on time. If you are self-employed or have recently changed jobs, approval becomes harder.

Most importantly, the bank will order an appraisal of both your current home and the new one you are buying. They use these appraisals to determine how much they will lend. If your current home appraises for less than you expected, the bank may reduce the loan amount or deny the process entirely.

Interest rates and fees you will pay

Bridging loan interest rates vary by lender and market conditions, but they are typically 1 to 3 percentage points higher than a standard mortgage rate. Because the loan is short-term, the total interest you pay may still be modest — a $100,000 bridging loan at 7 percent for three months costs roughly $1,750 in interest.

Beyond interest, expect to pay an origination fee (usually 1 to 2 percent of the loan amount) and possibly an appraisal fee, title search fee, and underwriting fee. Some lenders charge a prepayment penalty if you repay the loan early, though this is less common. Ask the lender for a full list of fees before you commit.

The total cost of a bridging loan can add up quickly, so compare the cost against your alternatives. If you can negotiate a longer closing timeline on your new home purchase, or if you can find a personal loan or home equity line of credit at a lower rate, those options may be cheaper.

When a bridging loan makes sense

Bridging loans work best when you are in a competitive real estate market and need to make an offer on a new home before your current one has sold. They also help if you have found the right home and do not want to lose it while waiting for your sale to close.

They make less sense if you are not under time pressure, if your current home is not yet listed for sale, or if you have other ways to cover the gap. For example, if you have savings or can borrow from family, that is usually cheaper than a bridging loan.

Bridging loans also carry a real risk: if your current home does not sell on schedule, or if it sells for less than expected, you still owe the full bridging loan balance. You cannot straightforward walk away. This is why banks require proof that a sale is already in motion before they will lend.

Alternatives to a bridging loan

If your bank does not offer bridging loans or if the cost is too high, you have other options. A home equity line of credit (HELOC) lets you borrow against the equity you have built in your current home. Interest rates are usually lower than a bridging loan, but you need to have significant equity available and the bank will still require a strong credit score.

A personal loan from a bank or credit union can also bridge the gap, though personal loan rates are typically higher than either a bridging loan or a HELOC. The advantage is that you do not need to own a home or have a sale in progress — you just need good credit and income.

Some people negotiate with the seller of the new home to delay closing until their current home sale is complete. This removes the need for a bridging loan entirely, though it only works if the seller is willing and if you do not lose the home to another buyer.

What happens if your home sale falls through

This is the scenario that keeps many people from pursuing a bridging loan. If your current home does not sell, or if the sale falls through after you have already borrowed the money, you are still responsible for repaying the bridging loan on the original schedule. You cannot extend the loan term or reduce the amount you owe.

If you cannot repay the loan when it comes due, the bank can foreclose on your new home or pursue other collection actions. This is why it is critical to have a realistic assessment of your current home's market value and sale timeline before you explore.

Some lenders offer a "bridge-to-rent" option, where you can rent out your current home if the sale does not close on time. This generates income to help cover the bridging loan payments, but it requires landlord insurance, tenant screening, and ongoing property management. Ask your lender whether this option is available.

Frequently Asked Questions

Can I get a bridging loan if my current home is not yet listed for sale?

Most banks will not lend without proof that your current home is actively for sale or already under contract. Some lenders may consider applications if you have a signed listing agreement with a real estate agent, but this is rare. The bank needs confidence that a sale is likely to happen within the loan term.

How long does it take to get approved for a bridging loan?

The approval process typically takes one to two weeks, though it can be faster if you have all documents ready. The lender needs time to order appraisals, verify your income, and review the sales contracts for both homes. Start the process as soon as you have an accepted offer on the new home.

What if I sell my current home for less than I expected?

You are still responsible for repaying the full bridging loan balance. If the sale price is lower than the bank's appraisal, you will need to cover the shortfall from your own funds or from the proceeds of the new home sale. This is why banks lend only a percentage of the expected sale price, not the full amount.

Can I use a bridging loan to buy a home without selling my current one?

Some lenders offer "bridge-to-permanent" loans where you keep your current home and rent it out instead of selling it. This is less common and requires proof of rental income or a lease agreement. Interest rates are typically higher because the lender is taking on more risk.

Are there lenders other than banks that offer bridging loans?

Yes. Credit unions, private lenders, and some mortgage companies offer bridging loans. Private lenders often have faster approval times but charge higher interest rates. Compare terms from multiple lenders before deciding, as costs can vary significantly.