Bridge loan
A bridge loan covers a gap between two transactions. Most commonly, buying a property before an existing one has sold.
The situation it solves#
A buyer needs the equity in their current property to fund the next purchase. The next purchase is available now. The current property has not sold.
Without financing, the choices are making an offer contingent on a sale — which is weak in a competitive market and frequently rejected — or losing the property.
A bridge loan removes the contingency by supplying the funds temporarily.
What it costs#
Short-term pricing. Points at closing, an elevated interest rate, often interest-only, and fees.
The cost is genuinely justifiable when it buys a property that would otherwise have been lost, and it is genuinely painful when the anticipated sale takes six months longer than expected.
The exit is everything#
A bridge needs somewhere to land, and the landing is the sale of the departing property.
Where that sale is delayed — a slow market, a buyer falling through, a title problem, a low appraisal — the borrower is carrying two properties and an expensive short-term loan simultaneously.
That combination is how bridge financing goes wrong, and it goes wrong for reasons outside the borrower's control.
Sizing the loan against a realistic sale price and timeline, rather than a hopeful one, is the whole of the risk management.
Bridge and hard money#
The terms overlap and are often used interchangeably.
Bridge emphasises the gap being covered — the borrower has an identified exit and needs to cross to it.
Hard money emphasises asset-based underwriting — the lender is looking at the property rather than the borrower, frequently on property conventional lenders will not finance at all.
In practice the same lenders make both, on similar terms, and the distinction is mostly about how the borrower describes the purpose.
Where investors use them#
Acquiring at a sheriff's sale or a tax-forfeited land sale, where funds are required immediately and conventional financing cannot participate.
Covering the period between purchase and a refinance, particularly where a seasoning requirement means the permanent financing is not yet available.
Funding a purchase while a 1031 exchange completes, where the 45- and 180-day deadlines leave no room for a slow closing.
Each of those is a genuine gap with a defined end. Where the end is not defined, a bridge loan is simply expensive money with a maturity date attached.