What is a Bridge loan ?

A loan that "bridges" the gap in time between the purchase of a new residence and the sale of the borrower's current residence. The borrower's current residence is used as collateral and the money is used to close on the new residence before the current residence is sold. Some are structured so they completely pay off the old residence's first mortgage at the closing of the bridge loan, while others add on the new debt on top of the old debt. A bridge loan usually runs for a term of four to eight months.