Bridge Loans — Short-Term Financing Between Your Purchase and Your Exit

What a bridge loan is

A bridge loan is short-term financing that "bridges" the gap between two events — most often between acquiring an investment property and either selling it or refinancing into permanent financing. Unlike a fix and flip loan, a bridge loan does not include a renovation budget or draw schedule; it is written against the property's as-is value on the assumption the asset is already habitable and close to stabilized.

Because these are business-purpose loans on non-owner-occupied property, they fall under Regulation Z's business-purpose exemption rather than the consumer mortgage rules that govern a primary-residence loan. That is why underwriting looks at the asset, the exit, and the borrower's experience rather than personal debt-to-income ratios.

How the structure works

• Term: commonly 12, 13, 19, or 24 months, interest-only, with a balloon at maturity. Extension options (typically 3 months, for a fee) are common but are not automatic.
• Leverage: up to about 80% of as-is value for experienced borrowers on a purchase; entry-tier borrowers frequently see 75%.
• Cash-out: generally capped near 65% LTV, and many programs cap the cash proceeds themselves (for example, $250,000, with the cap lifted at 50% LTV or below).
• Seasoning: refinances often require roughly six months of ownership before the appraised value can be used instead of the purchase price.
• Prepayment: most stabilized bridge programs carry no prepayment penalty, since a fast exit is the point.

Bridge loan vs. fix and flip vs. DSCR — picking the right product

These three products are frequently confused, and choosing the wrong one is the most common cause of a mid-process re-underwrite:

• Bridge: property is already in acceptable condition. No rehab holdback. Fastest and simplest underwrite. Exit is a sale or a refinance.
• Fix and flip / rehab: the property needs work. The lender escrows a renovation budget and releases it in inspected draws, and leverage is measured against After-Repair Value.
• DSCR: long-term (usually 30-year) rental financing qualified on the property's rent-to-payment coverage ratio. This is the usual permanent takeout at the end of a bridge.

What underwriting actually looks at

Bridge underwriting is asset-first, but the borrower still matters. Expect a review of:

• Credit: a 700 minimum score is common on stabilized bridge programs; a handful of programs go lower with reduced leverage.
• Experience: many programs require 2 or more investment properties rehabbed, constructed, sold, or stabilized in the prior three years. Lower-experience borrowers are tiered down on leverage.
• Liquidity: post-close liquidity around $20,000 is a typical floor, plus interest reserves where the property is not yet cash-flowing.
• Property condition and value: single-family, condo, or 1-4 unit in C1-C4 condition. C5 and C6 are generally ineligible, and properties valued under roughly $100,000 are commonly excluded.
• Valuation: a third-party hybrid valuation or full appraisal, with an internal valuation review. Transfer appraisals are typically not accepted.
• Exit plan: a written, credible exit — listing strategy and comparable sales, or a term sheet for the permanent refinance.

Who this fits

Investors buying at auction or from a motivated seller who need certainty of close; owners who need to season a recently purchased property before a DSCR refinance; operators repositioning a rental between tenants; and borrowers who need to unlock equity in an owned investment property for a short window. Simply Approved Mortgages is licensed in a limited number of states — your loan officer will confirm availability for your property and market.

What it costs

Bridge financing prices above permanent financing because the lender is taking short-duration, exit-dependent risk. Expect interest-only payments in the high single digits to low double digits, origination in the range of 1.5 to 3.0 points, plus standard third-party costs (valuation, title, legal entity review). Extension fees are commonly 0.5% to 1% of the loan amount.

Rates, fees, and leverage shown anywhere on this site are illustrative and not a quote, lock, offer, or commitment to lend. Binding figures appear on your Loan Estimate or Term Sheet.

How bridge financing is structured and what governs it

A bridge loan solves a timing problem, not a pricing problem. These are the rules that decide whether one is available to you and what it will demand.

Program parameters above are published by the agencies and enterprises named in the right-hand column and can change. They describe program rules, not an offer; eligibility, terms, conditions, and availability vary by borrower, property, lender, loan program, and state, and all loans are subject to lender underwriting and approval.

The honest question: are you solving timing or solving affordability?

Bridge financing is the right tool when the money genuinely exists and simply has not arrived yet. You have real equity in a home that will sell; you need it on Tuesday and it lands in November. That is a timing problem and a bridge solves it cleanly.

It is the wrong tool when the underlying issue is that the new payment is unaffordable and the plan depends on a sale price nobody has committed to. A bridge does not create equity. If the departing home sells for less than assumed, or takes twice as long, the balloon arrives anyway, and the borrower is carrying two obligations with no scheduled payoff. Before pursuing a bridge, write down the sale price you are relying on, subtract selling costs and the existing payoff honestly, and ask whether the plan still works with a materially lower number and a longer marketing period.

The alternatives most people should price first

A sale contingency in the purchase offer costs nothing and removes the risk entirely, though it weakens the offer in a competitive market. A home equity line drawn on the departing residence, opened before it is listed, is frequently cheaper than a bridge — but lenders generally will not open one on a property already on the market, so the sequence matters enormously. A rent-back agreement after selling first solves the same problem from the other direction and puts cash in hand before the purchase. Some sellers will accept a delayed closing.

Bridge financing earns its cost when those routes are closed: a competitive market where contingencies lose, a departing home already listed, or an investor purchase that has to close in days. Comparing all four before committing is the difference between a considered decision and an expensive default.

Investor bridges behave differently from consumer bridges

On the investor side, a bridge is standard working capital: acquire a property that cannot be financed conventionally in its current condition, stabilize it, then refinance into permanent financing or sell. The loan is business-purpose, typically vested in an entity with a personal guaranty, priced for speed, and often sized against after-repair value with rehab funds held in escrow and released by draw.

Those loans are outside consumer mortgage protections, which is precisely why the documents matter. Read the default provisions, the extension terms, the draw process, and any guaranty language carefully — there is no regulatory backstop, only the contract.

What a bridge lender needs to see

The exit carries the file, but it still has to be documented. These are the items that decide most bridge requests.

Documentation requirements vary by lender, program, and file. The list above describes what underwriting commonly accepts, not a determination about your income or your approval.

Bridge financing versus the other ways to buy before you sell

Four routes solve the same problem at very different costs. Price all four before choosing.

A worked example: what a bridge actually has to survive

Illustrative only. Not a quote, lock, offer, or commitment to lend; binding figures appear on your Loan Estimate. Figures are round numbers chosen to show the method.

A homeowner expects $420,000 from selling a house with a $190,000 mortgage payoff. Gross equity looks like $230,000. Subtract roughly six percent in selling costs — about $25,000 — plus a plausible price concession of $15,000, and the realistic net is closer to $190,000.

If the bridge was sized against the optimistic $230,000, the shortfall at payoff is real money that has to come from somewhere. If it was sized against $190,000, the plan survives a slower, softer sale.

Then run the carry: if both housing payments together are $6,200 a month and the departing home takes five months instead of two, that is roughly $18,600 of additional carry. Reserves have to cover it. A bridge that only works if the house sells in sixty days at full price is not a plan; it is a bet.

Illustrative only. Figures are examples used to show the arithmetic and are not a quote, lock, offer, or commitment to lend; binding figures appear on your Loan Estimate.

How this applies in Florida and Colorado

Florida. Florida bridge planning has to account for insurance and closing-cost realities on both properties at once. Windstorm and flood coverage in coastal counties raises the combined carry meaningfully, and Florida documentary stamp tax on the note plus intangible tax on the mortgage add real closing cost to a loan you intend to hold only briefly — which makes a short-lived bridge proportionally more expensive here than in states without those taxes. Seasonal buying patterns also matter: a departing home listed against seasonal inventory may take longer to sell, so build the carry estimate around a realistic local marketing period.

Colorado. Colorado bridge activity clusters along the Front Range and in mountain communities, where the timing mismatch is often sharpest because competitive purchases leave little room for a sale contingency. In wildfire-exposed areas, insurance availability on the incoming property can delay a closing independently of financing, so bind coverage early rather than assuming it. Mountain-market listings can carry longer marketing periods than metro comparables, and a bridge sized on metro velocity assumptions will underestimate the carry required.

Simply Approved Mortgages LLC arranges residential mortgage loans in Florida and Colorado, so the two applications above are the ones we can act on for a consumer file. Business-purpose loan products may be arranged in additional states only where permitted by applicable law and pursuant to applicable licensing requirements or exemptions.

How to run a bridge transaction without getting trapped

The order matters, particularly steps one and two — most bridge regrets trace back to skipping them.

1. Price the cheaper alternatives first. Sale contingency, HELOC opened before listing, and sell-then-rent-back. If any works, it almost certainly costs less.
2. Establish the realistic net from the departing home. Use a conservative price, real selling costs, and the actual payoff — then size everything from that number.
3. Document the exit in writing. A signed sale contract or a takeout commitment. Verbal expectations do not underwrite.
4. Stress-test the timeline and the carry. Model a sale that takes twice as long at a lower price and confirm reserves cover the combined payments through it.
5. Read the maturity and extension terms. Know the exact maturity date, what an extension costs, whether it is guaranteed, and what happens at default.
6. Confirm which disclosure regime applies. A consumer bridge on a dwelling carries Loan Estimate and Closing Disclosure timing; a business-purpose investor bridge does not.
7. Coordinate both closings and both insurance policies. Two properties means two hazard policies, two tax obligations, and lien releases that have to sequence correctly.
8. Execute the exit and retire the bridge. On sale or takeout, confirm the payoff is applied and the lien released, and keep the payoff statement.

Mistakes that cost people money on this

• Sizing the bridge on gross equity instead of net proceeds after selling costs and a realistic concession.
• Waiting until the departing home is listed to apply for a HELOC, by which point most lenders decline.
• Having no reserves for a sale that takes longer than expected.
• Assuming an extension will be granted rather than confirming the term in the note.
• Using a bridge to solve an affordability problem instead of a timing problem.
• Overlooking that both housing payments generally count in the debt ratio on a consumer file.
• Ignoring state closing taxes and fees on a loan that will only exist for a few months.
• Failing to confirm the lien is released after the payoff.

Is this the right move for your situation?

The honest answer depends on the file. These are the patterns we see on both sides.

Usually a good fit when

• You have substantial, documented equity in a home that will realistically sell.
• The purchase genuinely cannot wait and a sale contingency would lose the property.
• Reserves cover both housing payments for well beyond the expected marketing period.
• You are an investor acquiring property that needs stabilization before permanent financing.

Usually not the right move when

• The plan only works at an optimistic sale price with a fast closing.
• You could open a HELOC or accept a contingency and simply have not tried.
• Reserves are thin enough that two months of extra carry would be a hardship.
• The new payment is unaffordable on its own once the bridge is repaid.

None of this is a determination about your file. A Simply Approved Mortgages Loan Officer can run your actual numbers and show you what your disclosures would say.