That's where bridge loans come in. Redfin data shows San Francisco homes recently sold with an average of 4 offers and in just 18 days — down from 22 days the year before, with median prices up 14.2% (Redfin). In a market moving that fast, a contingent offer can knock you out before you even get a counter.
Most buyers have heard of bridge loans. Far fewer understand how they're actually structured, priced, and repaid. This guide walks through the mechanics step by step, not just the definition.
TL;DR
- A bridge loan uses equity in your current home to fund a new purchase before that home sells
- Terms typically run 6-12 months, with interest-only payments and a lump-sum payoff at the end
- Rates run higher than conventional mortgages because you're paying for speed and flexibility
- Buyers can submit clean, non-contingent offers in competitive markets
- Golden Gate Lending Group structures bridge loans for California luxury home transitions
What Is a Bridge Loan?
A bridge loan is short-term financing secured against your existing home. It "bridges" the gap between buying a new property and selling your current one.
A bridge loan is short-term financing secured against your existing home. It "bridges" the gap between buying a new property and selling your current one.
The problem it solves is simple but painful: your equity is locked up in a house you haven't sold yet, but you need cash now to close on the next one.
What it's not:
- Permanent mortgage: a temporary tool with a defined exit
- HELOC: different structure, though a HELOC can sometimes serve a similar purpose
- Personal loan: repaid in fixed installments rather than tied to a property sale
Fintech "buy-before-you-sell" programs have entered this space in recent years. Knock, for example, caps its bridge solution at $1,000,000 in current-home equity (Knock). That ceiling works fine for a mid-market home. It doesn't work for a $4 million property in Pacific Heights. Traditional bridge loans remain the go-to option once deal sizes climb into luxury territory.
Bridge loans also aren't one-size-fits-all. Golden Gate Lending Group, for instance, underwrites its owner-occupied bridge loans around a homeowner's buy-before-sell transaction: current mortgage balance, home equity, and next-purchase details, with no income verification required.
Its Hard Money and Fix & Flip bridge products, by contrast, are underwritten around investment property value, renovation scope, and exit strategy. Same category of loan, different underwriting logic entirely.
How Does a Bridge Loan Work?
A bridge loan moves through a defined sequence: qualification, funding, an interest-only holding period, and payoff. Here's how each stage actually plays out.
Qualifying and Structuring the Loan
The process starts when a buyer finds a new property and needs funds before their current home sells. Lenders then assess:
- Equity position — usable funds are tied to current-home equity; many lenders cap advances around 45%–65% LTV
- Credit profile — a commonly cited baseline is a credit score around 650 or higher, though this varies by lender
- Ability to carry multiple payments — can you handle your current mortgage, the bridge loan, and eventually the new mortgage at once? This is usually where deals stall. If a homeowner doesn't have enough equity, or their income can't realistically support three overlapping obligations, the loan doesn't get structured.
Funding and Loan-to-Value
The basic idea is simple: your available bridge funds come from the equity in your current home. The basic formula: Current home value − outstanding mortgage balance = available equity For example, a $2,000,000 home with a $300,000 mortgage balance leaves roughly $1,700,000 in equity. The lender advances only a portion of that equity, not all of it. Bridge-loan LTV ratios commonly fall in the 45%–65% range depending on property type and market conditions, though some products advertise advances up to 80% of appraised value (Bankrate). This number directly determines your leverage on the new purchase. More usable equity means a bigger down payment and a stronger offer.
The Interest-Only Holding Period
Once funded, you're typically making interest-only payments on the bridge loan while still carrying your existing mortgage — and soon, a new one too. Terms usually run 6-12 months, sometimes as short as 3 (Bankrate). Lenders watch your exit timeline closely. If your current home takes longer to sell than planned, you may need to revisit pricing strategy or lean on backup options like refinancing. A realistic, documented exit plan is required. Without one, carrying costs can climb quickly while you wait for a buyer.
Repayment and Payoff
The bridge loan gets paid off in full, almost always from the proceeds of your former home's sale. That single event frees you from juggling three loans and completes your move into the new place. Bridge rates often track from about prime to prime-plus-2. Against a WSJ Prime Rate of 6.75%, many quotes fall somewhere in the 6.75%–8.75% range (Bankrate). On a $300,000 balance held for six months in that range, interest alone runs roughly $10,125 to $13,125, before fees.
Where Are Bridge Loans Used?
Bridge loans fit at the offer-and-close stage — before a home-sale contingency would otherwise be required. They perform best in:
- Competitive seller's markets where multiple offers are the norm
- Luxury and high-value segments where fintech alternatives cap out too low
- Situations demanding a fast, non-contingent close
Those conditions show up constantly in California's tightest housing markets. Golden Gate Lending Group structures owner-occupied bridge loans for buyers across San Francisco's most competitive neighborhoods — including Pacific Heights, Presidio Heights, Nob Hill, and Noe Valley — plus broader Bay Area markets like Marin County and Silicon Valley.
In one case, a Golden Gate client won a home against 20 competing offers with a non-contingent bid and a 14-day close. That's the leverage a bridge loan provides when sellers won't wait.
Bridge Loan Costs and Alternatives
Bridge loans cost more than conventional mortgages. That premium buys speed and the ability to make a non-contingent offer. For comparison, Freddie Mac reported the 30-year fixed rate averaging 6.71% in a recent weekly survey (Freddie Mac) — close to the low end of typical bridge pricing, though bridge loans are short-term and structured very differently.
Main cost components:
- Interest, usually charged interest-only during the term
- Origination points, which vary significantly by lender
- Closing costs, historically ranging 1.5%-3% of the loan amount according to a 2020 Forbes Advisor benchmark (Forbes Advisor)
Alternatives worth knowing:
| Option | Best for | Tradeoff |
|---|---|---|
| HELOC | Homeowners with steady equity, lower urgency | Slower approval, variable rate |
| Home equity loan | Fixed-rate borrowing needs | Doesn't solve timing gap as directly |
| Contingent offer + kick-out clause | Buyers unwilling to carry two loans | Weaker offer, seller can accept backup bids |
| Buy-before-you-sell fintech programs | Mid-market home values | Equity caps often too low for luxury deals |
Each option works in the right situation. If you need speed, substantial equity access, and a clean non-contingent offer—especially on a higher-priced home—a dedicated bridge loan still fills a gap the alternatives rarely match.
Conclusion
A bridge loan's value comes from its structure: qualify on existing equity, fund the new purchase, carry interest-only payments, then repay through the sale of your old home. Understanding that sequence — not just the definition — is what lets you plan realistically instead of guessing.
That sequence only works if the loan is built around your exit. Golden Gate Lending Group has closed nearly $1 billion in bridge loans across California's luxury market and structures each deal around your actual exit plan rather than a generic template.
Frequently Asked Questions
What are current bridge loan financing rates?
Bridge loan rates typically run higher than conventional mortgage rates, often calculated as the prime rate plus a couple of percentage points. Exact pricing varies by lender, loan-to-value ratio, and borrower profile, so get a current quote before assuming a specific number.
What are alternatives to bridge loan financing?
Options include HELOCs, home equity loans, contingent offers with kick-out clauses, and buy-before-you-sell fintech programs. Each trades off speed, offer strength, or maximum loan size differently.
How much would a $300,000 bridge loan cost?
Using a rate range of roughly 6.75%-8.75%, six months of interest-only payments would run about $10,125-$13,125, plus closing costs historically in the 1.5%-3% range. Total costs vary by lender and loan term.
How much can I borrow with a bridge loan?
Lenders calculate available funds based on your current home's value minus your outstanding mortgage balance, then advance a portion of that equity. Specific LTV limits vary by lender, property type, and market conditions.
Is a bridge loan risky?
The main risk is carrying multiple payments (your current mortgage, the bridge loan, and eventually your new mortgage) if your existing home doesn't sell within the loan term. A realistic exit plan helps manage this risk.
How quickly can a bridge loan close?
Bridge loans close far faster than conventional mortgages, often within 14 days once pre-approval and documentation are in place. Some lenders can move even faster depending on the transaction.
