How does a bridge loan work for buying and selling simultaneously?
A bridge loan is exactly what it sounds like — financing that bridges the gap between buying your new home and selling your old one.
**How it works:** 1. You borrow against the equity in your current home 2. Use that money as the down payment on the new home 3. When your current home sells, you pay off the bridge loan
**The numbers on a typical Twin Cities bridge loan:** - Loan amount: Usually up to 80% of your current home's equity - Interest rate: 1-2% higher than conventional mortgage rates - Term: Usually 6-12 months - Closing costs: 2-3% of the loan amount
**Example:** You own a $400K home with a $200K mortgage. Your equity is $200K. A bridge loan might let you borrow $160K (80% of equity) to use as a down payment on your new home.
**The risk:** If your current home doesn't sell within the bridge loan term, you're paying two mortgages plus the bridge loan payment. That's three housing payments. On a $400K home + $500K home scenario, that could be $7,000-8,000/month.
**My rule:** Only use a bridge loan if your current home is listed, priced correctly, and showing well. Don't take a bridge loan and THEN list. That's backwards.
The best lenders I work with offer bridge financing specifically designed for buy-sell combos. Ask me for the short list.
I wrote this answer, and I stand behind it. I'm Chris Deutsch, a Minneapolis Realtor (MN #20382264). Twenty-five years of walking these neighborhoods, checking basements, and sitting across kitchen tables from people making exactly this call. I re-check every answer and date it — this one was last verified .
If your situation is more specific than the market, that's the one worth talking through. Email me at chris@lakesarearealty.com.