The basics
A bridge loan (sometimes called a swing loan) is short-term financing that lets you tap the equity in your current home to fund the purchase of your next one before the first sells. When your old home closes, you pay the bridge loan off with the proceeds.
Most bridge loans are interest-only, with the full balance due in one payment at the end. Terms vary by lender, but expect a few months up to about a year. They’re typically secured by your current home, the new one, or both.
Why buyers use them in resort markets
Mountain inventory moves fast, and sellers often prefer clean offers. An offer contingent on the sale of your home elsewhere can lose out to one that isn’t. Bridge funds let you:
- Make a non-contingent offer
- Cover your down payment or pay off your existing mortgage
- Avoid dropping your price to force a quick sale back home
What it costs
Bridge loans generally cost more than a standard mortgage, through higher interest rates and lender fees. Here’s a simple, hypothetical example: borrow $200,000 at 9% for six months and you’d pay roughly $9,000 in interest. Add a 2% origination fee ($4,000) and you’re near $13,000 before closing costs on either transaction. Rates and fees vary widely, so ask every lender for the total cost in dollars, not just the rate.
You may also carry two housing payments until your first home sells, so plan for that.
Where to find one
Not every large national bank offers bridge loans. Local banks, credit unions, and portfolio lenders are often your best bet, and a lender who knows the Western Slope market tends to understand the timing of resort transactions. Compare origination fees, closing costs, term length, and what happens if your home hasn’t sold by the maturity date.
Is it right for you?
A bridge loan tends to work best when:
- You have substantial equity in your current home
- Your home is priced to sell and likely to move within the loan term
- Your income and credit comfortably support both obligations
It’s worth reconsidering if your home has been sitting without serious offers, your equity is thin, or carrying two payments would strain you. Because the loan is secured by real estate, failing to repay at maturity puts that property at risk.
If you have a flexible timeline, a home equity line of credit (HELOC) or a cash-out refinance may cost less, though they’re usually slower to set up.
Next steps
Every buyer’s situation is different. Talk with a trusted lender about your options, and reach out to the Hoffman West team to plan your purchase timeline around your sale.
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