One of the most common dilemmas for existing homeowners: you've found your perfect next home, but your current home hasn't sold yet. Do you make an offer contingent on your sale (and potentially lose to a cleaner bid)? Wait until your house closes and risk losing the new home? Or move twice?
A bridge loan offers a fourth path: borrow against your current home's equity to fund the down payment on your next home — then repay the bridge loan when your existing home sells.
How Bridge Loans Work
A bridge loan is a short-term loan (typically 6–12 months) secured by your current home's equity. It provides the cash you need to close on your next home before your current home sells.
Basic structure:
- You own Home A (current), want to buy Home B (next)
- Bridge lender advances a loan against Home A's equity
- You use bridge loan proceeds as down payment on Home B
- Home A sells → proceeds pay off bridge loan → done
You typically make interest-only payments on the bridge loan during the transition period, then pay it off in full at Home A's closing.
Example: Colorado Springs Move-Up Buyer
| Item | Amount |
|---|---|
| Current home (Home A) value | $480,000 |
| Remaining mortgage on Home A | $190,000 |
| Equity in Home A | $290,000 |
| Bridge loan (70% of equity) | ~$203,000 |
| New home (Home B) purchase | $650,000 |
| Bridge loan used as down payment | $130,000 (20%) |
| New mortgage on Home B | $520,000 |
During the overlap period, you may carry:
- Interest on bridge loan (~$203,000 × 8.5% / 12 ≈ ~$1,436/month)
- Mortgage on Home A (~$1,234/month)
- Mortgage on Home B (~$3,371/month at 6.875%)
- Total temporary carry: ~$6,041/month
This overlap is typically 1–3 months. Once Home A closes, the bridge loan is paid off and you're down to one mortgage.
Bridge Loan Terms (2026)
| Feature | Typical Range |
|---|---|
| Loan term | 6–12 months |
| Interest rate | Prime + 1–2% (approximately 8–9.5% in 2026) |
| LTV | 70–80% of current home value (minus existing mortgage) |
| Origination fees | 1–2 points |
| Payments | Interest-only monthly or deferred to payoff |
| Qualification | Based on overall financial picture; some allow DTI flexibility |
Bridge loans are portfolio products — they don't conform to Fannie/Freddie standards. Lenders include local banks, credit unions, and private mortgage lenders.
Alternatives to Bridge Loans
HELOC (Home Equity Line of Credit):
If you have a HELOC on your current home, you can draw it down before listing and use the funds for a down payment. HELOCs are typically cheaper than bridge loans (lower rates, minimal origination fees). Downside: some lenders freeze or reduce HELOCs once the home is listed for sale — check your HELOC agreement.
Sale contingency offer:
Make an offer on Home B contingent on selling Home A first. In slower markets (more common in Florida's current environment), sellers may accept. In competitive markets (Colorado Springs, Denver suburbs), contingent offers often lose to non-contingent buyers.
Buy Home B before listing Home A:
If you have savings or 401k access for the down payment on Home B, you can close on it before listing Home A — no bridge loan needed. This creates temporary two-mortgage carry but avoids bridge loan costs.
Rent out Home A:
If you own Home A free and clear or have low mortgage, moving to Home B and renting out Home A as an investment property avoids the bridge scenario entirely. Verify rental income vs. carrying costs.
When Bridge Loans Make Sense
✅ You've found your ideal next home in a competitive market and can't afford a contingency
✅ Your current home has substantial equity (60%+ typically required)
✅ You have confidence your current home will sell within 3–6 months
✅ Your income can carry two mortgages + bridge payment for a few months
When bridge loans don't make sense:
❌ Your current home has less than 30–40% equity (bridge loan won't be large enough)
❌ Your current home is in a slow market where it may take 6+ months to sell
❌ Your income can't sustain the full carry even temporarily
Florida-Specific Considerations
Florida's condo and insurance market creates some bridge loan nuances:
- If your current Florida home has significant deferred maintenance or insurance issues, it may sit on the market longer than expected — affecting bridge loan repayment timeline
- Some Florida lenders have tightened bridge products for coastal markets given insurance uncertainty
Colorado-Specific Considerations
In Denver and Front Range metros, homes often sell in 2–4 weeks — making bridge loans very practical. In mountain markets (Vail, Aspen), where buyer pools are smaller, bridges can take longer to repay. Adjust your term accordingly.
FAQ
How do I qualify for a bridge loan? Most lenders want to see strong credit (700+), adequate income to carry both mortgages temporarily, and significant equity in the current home.
Are bridge loans risky? They carry risk if your current home takes longer to sell than expected. Have a plan: know the minimum price you'd accept, work with a strong listing agent, and price competitively.
Can I get a bridge loan from my current lender? Sometimes — ask your current mortgage servicer or bank first. Local community banks and credit unions often have the most flexible bridge products.
What if my home doesn't sell in 12 months? Bridge loan extensions are possible but expensive. If you're worried about timeline, set a more aggressive listing price to ensure quick sale.
Let's Work Through Your Move-Up Strategy
📞 970-708-9624 | tj@taytoncapitalllc.com
Contact Tayton Capital → | Apply Online
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