A bridge loan allows you to get from your existing home to your future home with temporary financing if you don't have enough liquid assets to pay for the second down payment, closing costs and old and new mortgages. Timewise, it's done during the mortgage process, Bechtel says. But, here's one big rub, says Bechtel. It's also meant as a short-term aid, typically not more than six months, though it often can be renewed for another three months or so. To secure a bridge loan, the borrower must have listed his current house with a broker who has access to the MLS directory and the property must be priced reasonably.
Many experts view it as an option of last or almost last resort.
Pull some equity from your existing home. Taking a home equity loan on your house is another viable strategy and somewhat more appealing to many buyers who have built up value in their first residence. The approval can occur in a day or two. While there are associated costs, including an appraisal and title and recording fees, most lenders absorb them, says Doug Wiand, a mortgage broker with River Valley Financial's Chicago office. Also, if you sell, you incur no prepayment penalties.