What Is a Bridge Loan for Home Buyers and When Should I Consider One in San Diego?

What Is a Bridge Loan for Buyers?

A bridge loan is short-term financing that allows a buyer to purchase their next home before selling their current one. It uses the equity in your current home as collateral to provide temporary funds for the down payment and purchase of the new property. Bridge loans bridge the gap between two transactions.

How Bridge Loans Work in San Diego

• Secured by equity in your current home — typically requires significant equity
• Provides funds for down payment and sometimes closing costs on the new purchase
• Interest-only payments during the bridge period — typically 6 to 12 months
• Paid off when your current home sells — from the sale proceeds
• Interest rates are higher than standard mortgages — typically 1 to 2 percent above market
• Most bridge lenders in San Diego require strong credit, low overall DTI, and substantial equity

The Benefit in San Diego's Competitive Market

A contingent offer — contingent on your current home selling — is a significant competitive disadvantage in San Diego's multiple-offer market. Many sellers will not accept contingent offers when they have non-contingent alternatives. A bridge loan allows you to make a non-contingent offer, dramatically improving your ability to compete for the home you want.

The Risk to Evaluate

If your current home takes longer than expected to sell, you will be paying two mortgages and a bridge loan simultaneously — potentially straining your cash flow significantly. Ensure you have sufficient reserves to carry both properties for at least 6 months before proceeding with a bridge loan strategy.

Alternatives to Bridge Loans

Other options include a sale contingency with kick-out clause (less competitive but no bridge loan risk), a temporary rental after selling, or a rent-back on your current home after close. Rieder Homes Group helps buyers evaluate all options in the context of their specific financial situation and target neighborhoods.

Related Reading on RiederHomes.com:

→ Blog #2: Mortgage Pre-Approval

→ Blog #3: Types of Home Loans

→ Blog #4: Down Payment Requirements

→ Blog #1: How Much Can I Afford?

— Mance Rieder, Broker Associate | Rieder Homes Group | REAL Broker | riederhomes.com | 858-295-0556