What is a bridge loan?

A bridge loan is a special type of loan for current home owner who needs to switch / move home while needing to use equity in current home to be applied to new home.

Millions of home owners move every year.  And most have this scenario where they are currently already in a mortgage, and in order to buy another house they need to use their equity from current house for their next house.

But the problem is how to sell and buy with good timing? This is called the chicken-and-egg problem.

This is when bridge loan can help. Owner can apply for a bridge loan where the current house equity will be mortgaged for next home's down payment.

The risk associated with any move are plenty. However the first question the home owner should consider is whether he/she is more comfortable risking paying double mortgage while waiting for the previous house is still on sale, or selling the current house first before finding a new house.