It can be hard to get the timing right when buying and selling a home. If you are selling a home, you may find the new home that you want to purchase prior to actually selling yours. Sometimes, you can make an offer on a home you want to buy with a contingency that says you must sell your current home first for the contract to be binding. However, this is not always an option. If you find yourself in a position where you have a house that you want to buy but have not yet sold your current house, a bridge loan may be something for you to consider.
A bridge loan is a short-term loan with a high interest rate. Its term is usually just for six months although there can be the opportunity to renew it for another six months. This loan is just supposed to carry you over until you get an expected payment or are able to secure a more permanent loan. A bridge loan is typically paid off in one lump sum. Prior to paying it off, you only make payments on the interest.
A bridge loan can add some stress to an already stressful time. To avoid it, you have a couple of options. First, make an offer on a home with the contingency that you have to sell your own home first. Or, simply have your current home sold or under contract prior to looking for a new home. The risk here is that you will sell your house but not find a new home that you want to buy yet. Finding an apartment with a short-term lease or staying with family or friends can solve that problem.
If you find a house that you just have to buy, but cannot sell your own first or the sellers will not accept a contingency, a bridge loan is an option that you can use.