What is a bridge loan?

A bridge loan is a short term or temporary loan used to cover the gap that can occur when buying a new home and not yet having sold an existing home. Bridge loans are used as the down payment needed on the new home purchase.

Advantages of a bridge loan include the ability of the buyer to place the home on the market without restrictions. Bridge loan payments may not be due for several months, depending on the terms of the loan.

Bridge loans can end up being more costly than home equity loans. Another disadvantage of a bridge loan is that extra interest that is accrued can be costly.