Bridge Loans: How to Buy a House Before Selling Yours

In a perfect world, every homebuyer would sell their current house the same day they close on a new one. But even if that were possible, you’d still face the logistical nightmare of coordinating movers, securing temporary housing, or relocating to a new city on the same day. That kind of timing isn’t just rare—it’s often unrealistic. Whether you’re trying to avoid a rushed move, preserve your investment portfolio, or simply act quickly on your dream home, a bridge loan can offer the flexibility you need.

This short-term financing option helps homeowners "bridge the gap" between buying a new house and selling their current one. In this article, we’ll break down what bridge loans are, how they work, and when they make the most sense—especially if you're trying to buy a house before selling yours.

What Is a Bridge Loan?

A bridge loan, also called a swing loan or gap loan, is a short-term mortgage that allows you to tap into the equity of your current home to fund the down payment on a house you're buying next. These loans are usually paid off with the proceeds from the sale of your existing home and typically last anywhere from 3 to 12 months.

Bridge loans are secured by your current home and may function as a second mortgage or pay off your existing mortgage entirely. Some bridge loans defer payments until your old home sells, while others require interest-only monthly payments. The best bridge loans defer payments entirely—so you're not juggling two mortgage payments at once. This structure eases financial pressure and lets you focus on the homebuying transition, not monthly bills.

How Bridge Loans Work

Here’s a typical example:

A family is relocating from Florida to Texas. They’ve found the perfect home in Austin but aren’t ready to list their current house just yet. They want time to settle into their new city, enroll the kids in school, and move without the chaos of rushing timelines or temporary housing. But like most families, they don’t have hundreds of thousands of dollars sitting in cash. And they don’t want to liquidate a stock portfolio or investment account—especially if that means triggering a taxable event or missing out on future growth. A bridge loan allows them to move first, then sell later, without the stress of two simultaneous transactions.

• Your current home is worth $600,000, and you owe $200,000 on your mortgage.

• You want to buy a new home for $1,000,000, but you don’t have $200,000 on hand for a 20% down payment.

• A bridge loan allows you to borrow up to $250,000 more on your current home (i.e., increasing the mortgage to $450,000): giving you up to $250,000 to put towards your new home.

Once your existing home sells, you use the sale proceeds to repay the bridge loan. This includes the full principal and any accrued interest. Since most bridge loans don't require monthly payments, all costs are settled in one lump sum—freeing you from long-term debt and allowing you to move forward with your new mortgage uninterrupted.

When a Bridge Loan Makes Sense

In many cases, timing the sale of your current home with the purchase of your next one just isn’t realistic. That’s where bridge loans come in. Here’s when they make the most sense:

Relocating and get the time you need to settle in: Maybe you’re moving from Florida to Texas and want to get your family situated in the new home, new schools, and new routines before turning your attention to listing your old home. A bridge loan gives you the financial flexibility to make that move before selling.

Staging and Selling for More: If you're thinking, “I want to sell my house to buy another,” but also want top dollar for your current home, a bridge loan lets you prep and stage your home properly. Staging can make a huge difference in how quickly a home sells—and for how much. Buyers don’t want to see how you lived in the space; they want to imagine how they’ll live in it. That’s harder to do when a home is full of personal items or clutter. With a bridge loan, you can move out first, allowing your home to be professionally staged or shown vacant, which often results in a faster sale and a higher price.

Avoiding Capital Gains Triggers: If your down payment funds are tied up in an investment portfolio, selling stocks could create a large capital gains tax event and possibly disrupt long-term growth. For homeowners asking, do I have to pay tax on stocks if I sell and reinvest?—the answer is often yes, and it can be significant. A bridge loan lets you avoid liquidating those investments entirely. That means no capital gains tax, no disruption to your portfolio, and no lost market opportunity while still giving you the liquidity to close on your next home.

Get the cash for a second down payment: Even if you’re equity-rich, you might be cash-poor. Bridge loans let you unlock the equity in your existing home to fund your next one.

Easing DTI Challenges: Bridge loans can help pay off your existing mortgage, improving your debt-to-income ratio (DTI) and helping you qualify for a larger or better-priced mortgage on your next property. Better yet, bridge loans are excluded from the DTI calculations, which means that you aren't being penalized for having two mortgages. That can open the door to better terms on your new home loan.

Pros and Cons of Bridge Loans

Bridge loans can be a powerful financial tool—but like any loan product, they come with trade-offs. Understanding both the benefits and the limitations can help you decide if this short-term financing solution is right for your situation.

Pros:

• Buy before you sell: Gain flexibility and control over the timing of your next home purchase.

• No sale contingency needed: Strengthen your purchase offer in competitive markets.

• Quick access to cash: Tap into your current home's equity to cover your down payment on a house.

• Avoid triggering capital gains: Use a bridge loan instead of selling investments.

• Flexible repayment: Some lenders offer deferred or interest-only payments.

Cons:

• Higher interest rates: Bridge loans usually carry rates 1.5% to 3% higher than traditional mortgages.

• Short repayment window: Terms are often limited to 6–12 months.

• Origination fees and closing costs: You’ll face fees similar to a standard mortgage.

• You’ll still need to qualify: That includes credit score, income documentation, and equity minimums.

Bridge Loan Requirements

Every lender has different criteria, but most will want to see:

• At least 20% equity in your current home after the bridge loan is put in place

• A solid credit score (often 700+)

• Proof your home is listed for sale or under contract prior to closing on the bridge, but this can normally get an exception.

Alternatives to Bridge Loans

If a bridge loan isn’t a fit, here are some alternatives to consider—though none fully address the challenges bridge loans solve:

• Home Equity Loan or HELOC: A home equity line of credit can work in some cases, but the interest rates are often higher than bridge loan rates. You’ll also have to manage two mortgages at once, which may stretch your finances.

• Cash-Out Refinance: Lenders rarely allow a cash-out refi if they know you intend to sell the property within 6 months. It also may carry steep closing costs that are just as steep as a bridge loan, meaning the only real savings is a couple months at a 1-2% lower rate.

• 401(k) Loan: Tapping retirement funds can impact your long-term savings. It also increases your reported debt, potentially hurting your DTI and approval odds.

None of these options directly solve the debt-to-income (DTI) issue that bridge loans are key in addressing. For many homeowners looking to buy before they sell, a bridge loan remains the most targeted and effective solution.

What to Expect with a Bridge Loan: Closing Costs and Rates

Bridge loan interest rates today are roughly 9%, depending on the lender and risk factors. Expect:

• Origination fees (2-2.5%): These are upfront costs charged by lenders to process the bridge loan, typically calculated as a percentage of the total loan amount.

• Appraisal and underwriting costs: You'll need to pay for a professional valuation of your home and the lender’s underwriting of your file.

• A balloon payment due at the end of the term: Bridge loans often require the full loan amount to be repaid in a lump sum once your current home sells.

• No monthly payments: Most bridge loans don't require monthly payments. Instead, interest accrues during the loan term and is paid—along with the principal—when your current home sells.

Who Offers Bridge Loans?

Not all lenders offer residential bridge loans in Florida,Texas or other states, but providers often include:

• Mortgage brokers like LendFriend, offering custom buy before you sell programs

• Regional banks and credit unions

• Portfolio lenders and non-QM providers

• Industry competitors like Homeward, Homelight, and UpEquity

LendFriend stands out by tailoring bridge loan solutions to each borrower’s timeline and financial profile. With fast approvals, no hidden fees, and a deep understanding of transitional home financing, our team helps you act quickly—without sacrificing your financial goals. If you're looking for a lender that puts flexibility, speed, and strategy first, LendFriend is built for you.

The Bottom Line

If you're asking how to buy a house when you own a house or can I buy another house before I sell mine, a bridge loan may be the solution. You can access equity without needing a guaranteed offer for my home or triggering a capital gains tax event.

Bridge loans give you time, flexibility, and negotiating power. Whether you’re navigating a buy now sell later mortgage scenario or simply don’t want to deal with contingencies, this could be the tool that helps you move forward confidently.

If you’re considering your options, LendFriend offers a streamlined Buy Before You Sell Program with competitive pricing and fast turnarounds.

 Schedule a call with me today or get in touch with me by completing this quick form, and I'll answer any questions you might have about bridge loans and how to buy a new house before you sell.