Cost of a Bridge Loan When Buying Before You Sell

Educational only. This explains how these situations generally work. It is not legal, tax or financial advice, and the rules differ by state — talk to an attorney or CPA about your own situation before you act on any of it.

How a Bridge Loan Actually Works

This is educational information, not financial or legal advice. Loan terms vary by lender and by your specific credit, equity, and market. Talk to a mortgage lender about your actual numbers before deciding.

A residential bridge loan is typically a short-term second lien against your current, departing home — not a loan cross-collateralized against the new property you're buying. Fannie Mae's own guidance to lenders is explicit on this point: “the bridge loan cannot be cross-collateralized against the new property,” and the lender must separately document that you can afford payments on the new home, the current home, and the bridge loan all at the same time (Fannie Mae Selling Guide, B3-4.3-14, Bridge/Swing Loans).

Mechanically: you keep your existing first mortgage in place if you have one, take out the bridge loan as a second lien on the current home, and use the proceeds to cover the down payment and closing costs on the new purchase. When the old home sells, the sale proceeds pay off both the original mortgage and the bridge loan. Terms commonly run 6–12 months, interest-only, with the full principal due as a balloon payment once the old home sells — Fannie Mae itself sets no specific maximum term length.

What It Actually Costs

The quoted interest rate is only part of the bill. Residential bridge loans generally run roughly 1.5 to 5 percentage points above a standard first-mortgage rate, and lenders typically charge 1.5% to 3% of the loan amount as an origination fee on top, plus a few hundred dollars each for appraisal and underwriting. Because bridge loans of 12 months or less are exempt from the standard federal disclosure requirements that apply to a normal purchase mortgage — per Consumer Financial Protection Bureau Regulation Z, which specifically defines and exempts “a temporary or 'bridge' loan with a term of 12 months or less” used to buy a new home while planning to sell the current one (CFPB, 12 CFR § 1026.43(a)(3)(ii)) — fee disclosure on these loans is also less standardized than what you'd get on a normal mortgage, so it pays to ask for every fee in writing before you commit.

Worked example (illustrative, not a quote or offer): a $150,000 bridge loan, 6 months, interest-only, at an assumed 9.5% rate — a reasonable midpoint given prime sits at 7.00% as of September 2026 and bridge loans commonly price 1.5–5 points above prime. Monthly interest: $150,000 × (9.5% ÷ 12) = $1,187.50/month. Six months of interest-only payments: $1,187.50 × 6 = $7,125. Upfront fees: a 2-point origination fee ($3,000), appraisal (~$600), underwriting (~$750), and miscellaneous title-related fees (~$500) — $4,850 total. Total real cost of the loan: roughly $11,975, or about 8% of the amount borrowed, for six months' use.

That $4,850 in fixed fees is the part that catches people off guard. Spread over only 6 months instead of a full year, it pushes the effective annualized cost to roughly 16% ($11,975 ÷ $150,000 ÷ 0.5 years) — nearly double the 9.5% rate quoted on the paperwork. The shorter the bridge, the worse this ratio gets, because the fixed fees don't shrink even when the loan term does.

Qualifying: Why It's Harder Than a Normal Mortgage

Lenders generally want you to hold at least 15%–20% equity in your current home, which caps the bridge loan at roughly 80%–85% of that equity. The bigger hurdle is debt-to-income: because a bridge loan creates what Fannie Mae calls a contingent liability, its guidance requires the payment to be included in your DTI calculation right alongside your current mortgage and your new mortgage — effectively underwriting you as if you're carrying three housing debts at once (Fannie Mae Selling Guide, B3-6-05, Monthly Debt Obligations). The one way around that: if you already have a fully executed sales contract on your current home with financing contingencies cleared, Fannie Mae's guidance allows the lender to exclude the old mortgage and bridge payment from your DTI — which is exactly why bridge loans work best for people who are under contract to sell, not people who are just hoping to sell soon.

Without that executed contract, expect the qualification bar to be meaningfully higher than a standard purchase mortgage, since you're being underwritten to carry all three payments simultaneously if your old home takes longer to sell than planned.

Alternatives Worth Comparing

A HELOC on your current home instead. Generally cheaper — HELOC rates have recently run closer to prime, versus the elevated rates bridge loans carry — but most lenders won't approve a new HELOC once your home is already on the market, so it has to be arranged weeks or months in advance, and it still requires sufficient equity and normal underwriting time. See our guide on the cost of a HELOC or second mortgage when you sell for the arithmetic on that route specifically.

A contingent offer on the new house. No bridge financing cost at all, but weak in a competitive market where sellers routinely pass over offers contingent on the buyer's own home selling first.

Sell first, then rent or move temporarily. Avoids the bridge loan's cost entirely and removes the two-mortgage qualification hurdle, at the cost of a double move and some housing uncertainty in between.

Sell to a cash buyer with a fast, flexible close. This is the honest comparison, not a free alternative: a fast cash sale typically nets less than a fully marketed retail listing, the same tradeoff covered in our guide on cash offers versus listing net proceeds. But it removes the bridge loan's roughly $12,000 real cost in the example above, the DTI qualification hurdle, and the risk of carrying three payments if the old home sits longer than expected — worth weighing against the bridge loan's cost and qualification risk directly, not assuming either option is automatically better. See also our guide on how fast you can really close on a house for what a fast timeline actually looks like in practice.

Common questions

How does a bridge loan work when buying a new house before selling the old one?

It's typically a short-term second lien on your current, departing home — not a loan secured against the new property. You use the proceeds for the down payment and closing costs on the new home, then pay off the bridge loan (and your old mortgage) when the old home sells. Terms commonly run 6–12 months, interest-only, with a balloon payment due at sale.

What does a bridge loan really cost?

More than the quoted rate suggests. On a $150,000, 6-month bridge loan at a representative 9.5% rate, interest-only payments run about $7,125, plus roughly $4,850 in origination, appraisal, and underwriting fees — a total real cost near $12,000, or an effective annualized cost around 16% once the fixed fees are spread over just six months.

Is a bridge loan harder to qualify for than a regular mortgage?

Often, yes. Fannie Mae guidance requires lenders to count the bridge loan as a contingent liability in your debt-to-income calculation alongside your old and new mortgage payments, unless you already have a fully executed, contingency-cleared sales contract on your current home — in which case that debt can be excluded from your DTI.

Is a HELOC cheaper than a bridge loan?

Generally yes on rate, but most lenders won't approve a new HELOC once your home is actively listed for sale, so it has to be arranged well in advance and still requires sufficient home equity and normal underwriting time — it isn't a fast, last-minute substitute.

Are bridge loans regulated the same way as a normal mortgage?

No. Under CFPB Regulation Z, a bridge loan with a term of 12 months or less used to buy a new home while planning to sell the current one is specifically exempt from the standard ability-to-repay and RESPA disclosure rules that apply to a normal purchase mortgage, so fee disclosure is less standardized — get every fee in writing before committing.

What's the alternative to a bridge loan if I want to buy before I sell?

A HELOC arranged in advance, a contingent offer (weak in competitive markets), selling first and renting temporarily, or selling to a cash buyer on a fast, flexible timeline. Each trades cost, speed, and certainty differently — a cash sale typically nets less than a fully marketed retail listing but removes the bridge loan's real cost and qualification risk entirely.