Why Borrowers Require Bridge Funds

Bridge funds are temporary loans that bridge the gap between the amount of money needed to close a purchase and how much will be available from the sale proceeds of an existing property.   If your purchase transaction is closing before your sale closes, then bridge funds will rely on the available equity in your existing home to help you complete the purchase on time.


Bridge funds can go for as little as a few days or, in some cases, up to 12 months. To qualify for bridge funds, you must have a firm sale agreement, meaning there aren't any conditions like financing or a home inspection, still outstanding.


Bridge funds are utilized in competitive real estate markets where purchasers need to entertain an earlier closing date and don't want to worry whether or not their existing home has sold yet. Bridge funds get repaid on the day your sale closes. Your real estate lawyer will re-direct the amount required to pay off the bridge loan in full.

Advantages of a bridge loan:

• Allows you to close your purchase transaction before your sale closes.
• Provides comfort in knowing you have the flexibility to decide what day you want your purchase or sale to close.

Disadvantages of a bridge loan:

• The interest rate may be slightly more than a conventional mortgage (however, keep in mind that the interest is charged on a daily basis, and the loan is short term). 
• Can pose a greater risk to you since you are now taking on a larger loan to cover the purchase of your house. 

Before purchasing another property, it's best to speak to a mortgage professional about buying and selling. 

If you have mortgage questions, call today.