What is a Residential Bridge Loan?
A residential bridge loan is a short-term loan secured by real estate that is designed to bridge the gap between buying a new property and selling an existing one. The borrower uses the equity in their current home as collateral, receives the funds needed for a down payment or outright purchase, and then repays the bridge loan when the existing property sells.
Bridge loans are particularly well-suited for homeowners who have substantial equity but may not have enough liquid cash for a down payment, or whose income might not satisfy conventional loan requirements. Seniors and retirees are among the most common bridge loan borrowers, precisely because they have built decades of equity but may have retired income that does not look right on a standard loan application.
How Do Bridge Loans Work? A Real Example
A couple owns a home in San Diego and wants to move to a larger property in a different neighborhood. They have significant equity but not enough cash on hand for a down payment on the new home. Without a bridge loan, their options are unpleasant: sell first, move into temporary housing, then search for and buy the new home under time pressure.
Instead, they contact North Coast Financial. A bridge loan is funded within three weeks using their existing home as collateral. They present an all-cash offer on the new property and the seller accepts. They move in. Three months later, the original home sells and the bridge loan is paid off in full. No moving twice. No contingent offer rejected. No temporary housing.
Hard Money Bridge Loans
Private hard money bridge loans are usually faster and more flexible than bank financing for this kind of short-term need. Unlike conventional banks, which are optimized for 30-year mortgages and have little appetite for short-term lending, hard money lenders are built specifically for transactions like these.
Here is how the two compare:
| Feature | Hard Money Bridge Loan | Conventional Bank |
|---|---|---|
| Funding Timeline | About 7 days once the file is complete (investment); 2 to 2.5 weeks (owner-occupied) | 30 to 45+ days |
| Underwriting Focus | Property value and equity | Income, credit, employment |
| Credit Requirements | Flexible; past issues considered | Strict minimums required |
| Income Verification | Reviewed; the exit plan carries the most weight | Full documentation required |
| Appraisal | No appraisal ordered or required | Formal appraisal required |
| Loan Term | Up to 11 months | 15 to 30 years |
Bridge Loans for Self-Employed Borrowers
Conventional bank financing is notoriously difficult for self-employed borrowers. Tax returns often show lower income than the borrower's actual financial position due to legitimate deductions. Banks look at what the tax return says; hard money lenders look at what the property is worth.
If you have significant equity in your California property, a bridge loan can work even when your tax returns understate your income. Loans are subject to property evaluation and lender approval. The property is the collateral. The sale of that property is the exit strategy. That is what matters.
Residential Bridge Loan Rates
North Coast Financial offers California bridge loan rates from 9.95% to 10.95% (APR 11.40% to 13.22%) on first-lien loans. Second-position bridge loans are priced higher, typically 12% to 12.5% plus 2 to 3 points (APR about 14.3% to 16.1%); call for a quote. Origination points run 1.25 to 1.95. There is no lender fee and no appraisal fee.
Loans are available for up to 11 months. There is no prepayment penalty, so if your home sells in 45 days, you pay off the bridge loan then with no additional cost. The faster the payoff, the lower your total carry cost.
| Rate Component | Range | Notes |
|---|---|---|
| Interest Rate | 9.95% to 10.95% | First-lien loans; fixed for the loan term |
| APR | 11.40% to 13.22% | Includes points and fees |
| Origination Points | 1.25 to 1.95 | 1 point = 1% of loan amount |
| Lender Fee | None | No lender fee charged |
| Appraisal Fee | None | We do not order appraisals |
| Prepayment Penalty | None | Pay off early at no cost |
| Maximum LTV | 65 to 70% | Depends on property and scenario |
| Maximum Term | 11 months | Most loans pay off within 90 days |