A bridge loan is a type of short-term loan used to bridge the gap between the purchase of a new property and the sale of an existing property. It is often used in real estate transactions where a homeowner wants to purchase a new home but has not yet sold their current home.
In such cases, the homeowner may not have enough funds to make the down payment on the new home without selling their existing property. A bridge loan allows them to borrow money to make the down payment, with the expectation that the loan will be repaid once the sale of the existing property is completed.
Bridge loans typically have higher interest rates and fees than traditional mortgages, as they are considered higher risk. They are typically short-term loans, ranging from a few weeks to a few months, and may require collateral such as the existing property or the new property being purchased.
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