Bridge Financing

Definition

• When a gap in time exists between the selling and buying of an asset(s), bridge financing is used to maintain liquidity. As it relates to real estate and mortgages, a bridge loan is often used so that a homebuyer can finance a property purchase, even if they are still in the process of selling their old home.

Synonyms
short-lived loan, open mortgage loan, short-term mortgage, temporary financing

Related Terms and Acronyms

• Bridge Loan — Definition,
  • A loan that "bridges" the gap between the purchase of a new home and the sale of the borrower's current home. The borrower's current home is used as collateral and the money is used to close on the new home before the current home is sold. Some are structured so they completely pay off the old home's first mortgage at the bridge loan's closing, while others pile the new debt on top of the old. They usually run for a term of six months.
• Bridge Mortgage — Definition, Important,
  • A short-term loan used to allow a homebuyer to purchase a replacement property while still trying to sell their existing home.
• Commercial Mortgage — Definition, Very Important,
  • A mortgage for commercial property.