What is Bridge Financing?

Let’s say you have a home that you’ve outgrown, it’s time to make a move to something more suited for your family. You have no desire to keep two houses, so you decide that selling your existing home and moving into something new is the best idea.

Ideally, when planning out how that looks, most people want to take possession of the new house before having to move out of the old one. Not only does this make moving (your stuff) easier, it allows you to make the house a little more “you” by adding some paint or doing some small renovations before moving in.

But what if you need the money from the sale of your existing house to come up with the down payment for your next house? This is where bridge financing comes in. Bridge financing allows you to bridge the financial gap between the firm sale of your current home and the purchase of your new home. Bridge financing allows you to access some of the equity in your existing property to be used towards the down payment on the property you are buying.

Now, here is where people get confused. In order to secure bridge financing you must have a firm sale on your existing house. If your house isn’t sold you won’t get the bridge financing because the property has to be sold in order for the lender to get their bridge loan back.