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What type of loan is a bridge loan?

A bridge loan is a type of short-term loan that is used to finance the purchase of a new property before the borrower has sold their current property. Bridge loans are typically used by real estate investors and homeowners who need to sell their current property in order to finance the purchase of a new property.

Bridge loans are often characterized by the following features:

  1. Short-term duration: Bridge loans are typically designed to be repaid within a year or less.

  2. High interest rates: Bridge loans often have higher interest rates than traditional mortgages.

  3. Collateral: Bridge loans are typically secured by the borrower's current property, which serves as collateral for the loan.

  4. Repayment: Bridge loans are typically repaid when the borrower sells their current property or refinances the loan into a traditional mortgage.

Bridge loans can be a useful financing option for borrowers who need to sell their current property in order to purchase a new one, but it's important to carefully consider the terms of the loan before committing to borrowing the money. Bridge loans can be more expensive than traditional financing options and may not be suitable for everyone.


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