A bridge loan typically costs between 8% and 12% in annual interest, plus 1% to 3% of the loan amount in origination points and several hundred dollars in other closing costs. On a $200,000 bridge loan carried for six months, that works out to roughly $10,000 to $15,000 in total out-of-pocket expense before the loan is repaid. Your actual number depends on three things: your credit score, how much equity sits behind the loan, and how long the loan stays open before your old home sells. Those variables interact in ways that can double the cost for one borrower compared to another, so the breakdown matters more than any single headline figure.
The Interest Rate You’ll Pay
Interest is the single largest variable cost. Bridge loan rates in 2026 generally run from about 8% to 12% annually, well above what a conventional 30-year mortgage charges. Some lenders quote the rate as a spread over the prime rate instead. With prime sitting at 6.75% in early 2026, a spread of 2 to 3 points puts the effective rate at roughly 8.75% to 9.75%, which lines up with the middle of the broader range.
Where you land inside that range depends heavily on your credit profile and your loan-to-value ratio. A borrower with strong credit and a 60% LTV might see something near 8%. Someone pushing closer to the 80% cap most lenders enforce, with only middling credit, can see rates above 11%. The rate is calculated monthly even though it’s quoted annually, so on a $200,000 loan at 9%, interest alone runs $1,500 a month.
Origination Points and Closing Costs
Beyond interest, bridge loans carry front-loaded fees that hit at closing. The biggest is the origination fee, quoted in points where one point equals 1% of the loan amount. Residential bridge loans commonly charge 1 to 3 points. On a $300,000 loan, a 2-point origination fee costs $6,000 before a single interest payment accrues.
The rest of the closing costs mirror what you’d see on a conventional mortgage:
- Appraisal fee, roughly $315 to $425, with a national average near $360.
- Title insurance and escrow fees, which vary by location but often run from a few hundred dollars to over a thousand.
- Processing and underwriting fees, adding several hundred dollars in administrative costs.
- Recording fees for filing the new lien, which vary widely by jurisdiction.
Many lenders let you roll these fees into the loan balance instead of paying them at closing. The trade-off is that you then pay interest on those fees for the full term. A $7,000 fee package rolled into a 9% loan for six months adds about $315 in extra interest. A modest amount, but avoidable.
A Realistic All-In Example
Concrete numbers make the math easier to evaluate. Take a homeowner with a $500,000 home, a $200,000 existing mortgage balance, and a $200,000 bridge loan at 9% interest with a 2-point origination fee, held for six months:
- Origination fee (2 points): $4,000
- Interest (6 months at 9%): $9,000
- Appraisal, title, and miscellaneous closing costs: about $1,500
- Total: about $14,500
That’s roughly 7.25% of the loan amount, spent in six months. If the home takes a full year to sell, the interest doubles to $18,000 and the total climbs past $23,000. Roll the closing costs into the loan and the effective principal becomes $205,500, which slightly increases every month’s interest charge. Every month the loan stays open costs real money, so the speed of your home sale is the single biggest lever on your actual expense.
What Moves Your Rate Up or Down
Lenders price the loan against the risk they’re taking, and a handful of factors move the needle in meaningful ways.
A strong credit score, generally 740 or higher, earns the best rates and may shave half a point or more off the origination fee. Most lenders want a minimum score around 680 to qualify at all. Below that, expect either a denial or notably higher pricing from a private lender.
The LTV ratio matters as much as credit. A loan at 60% LTV gives the lender a large equity cushion and prices more favorably than one at 80%, where the lender is exposed to even modest declines in the home’s value.
Property type shifts the equation too. Bridge loans for investment properties or fix-and-flip projects run higher than those secured by a primary residence, because the lender is underwriting both market and construction risk. Bridging the gap on a new primary home while your current one sells sits in the lowest-risk bucket.
Your lender choice introduces the widest pricing spread. Banks and credit unions tend to offer lower rates but move slowly and hold you to stricter qualification standards. Private lenders and specialized mortgage companies can close in days rather than weeks, and they charge for that speed with higher rates and more origination points. Shopping at least three lenders is the single most effective way to reduce total cost.
How Repayment Structure Changes the Total
Most bridge loans require interest-only payments during the term. You’re not chipping away at principal each month; you’re just covering interest while you wait for the old home to sell. This keeps monthly payments manageable at a time when you may be carrying two properties.
Some lenders offer deferred interest, where no monthly payments are due at all. Interest accrues and gets added to the principal, and everything is paid in a single balloon at closing on the old home. This sounds appealing, but you’re paying interest on interest for the life of the loan, which quietly inflates the total cost.
Terms usually run six to twelve months, though some lenders go up to three years. Duration directly controls total interest expense. A $200,000 loan at 9% costs $9,000 in interest over six months but $18,000 over a full year. In a market where properties move quickly, the shorter term saves real money.
Fine Print That Can Inflate the Cost
Some lenders include a minimum interest guarantee, meaning even if your home sells in month two, you still owe interest for the full six or twelve months stated in the contract. Others charge a prepayment penalty of 1% to 2% of the loan balance for early payoff. A few impose lockout periods where early repayment isn’t allowed at all. Not every lender includes these provisions, and they’re often negotiable, but you need to read the loan documents before closing. A loan you expected to carry for three months can cost nearly as much as a six-month loan if a minimum interest clause is in the contract.
Extensions carry their own cost. If your current home hasn’t sold by the maturity date, most lenders will extend the loan, but rarely for free. Expect an additional fee, often structured like the original origination charge, plus a possible bump in the interest rate for the extended period. Some contracts spell these terms out upfront; others leave them to negotiation when the clock runs out.
Default pricing is far worse than the contract rate. One court case upheld a default rate of 4% per month on a bridge loan, a figure that would devastate any household budget. Even where a lender’s default terms are less aggressive, penalty interest compounding on a six-figure balance adds thousands per month. Don’t take a bridge loan unless you have a realistic backup plan for a home that sits on the market longer than expected.
Is the Interest Tax-Deductible?
Bridge loan interest may be deductible, but the rules are specific. Under IRS home mortgage interest rules, you can deduct interest on a loan if it’s a secured debt on a qualified home and the proceeds are used to buy, build, or substantially improve that home. The deduction is capped at $750,000 in total mortgage debt ($375,000 if married filing separately) for loans taken out after December 15, 2017.
A bridge loan secured by your current home and used to purchase a new primary residence can qualify as deductible acquisition indebtedness. The IRS treats a mortgage as acquisition debt if you buy a home within 90 days before or after taking out the loan, even if the mortgage is technically secured by a different property.
The catch: your existing mortgage, the bridge loan, and the new home’s mortgage all count toward the $750,000 cap. If your combined debt exceeds that threshold, only the interest on the first $750,000 is deductible. You also have to itemize on Schedule A rather than taking the standard deduction, which limits the benefit for many taxpayers. Run the numbers with a tax professional for your specific situation.
Cheaper Alternatives Worth Pricing First
A bridge loan isn’t the only way to buy before you sell, and for many homeowners it isn’t the cheapest.
A home equity line of credit taps the same equity a bridge loan would, typically at a lower interest rate and with more flexible repayment terms. You pay interest only on what you draw, and there’s no balloon deadline tied to your home sale. The catch is timing: most lenders won’t open a HELOC once the home is already listed, so you have to plan ahead.
A sale contingency makes your purchase offer conditional on your current home selling first. There’s no extra financing, no risk of carrying two properties, and no interest bill. The trade-off is competitiveness. In a seller’s market, contingent offers often lose to buyers who can close unconditionally. In a slower market, a contingency costs you nothing and removes the financial risk entirely.
If you have retirement savings, some borrowers use a short-term 401(k) loan for the down payment on the new home, though it carries its own risk if you leave your job before repaying it. Each alternative trades off differently on speed, cost, and flexibility, and the right choice depends on your local market and how quickly your current home is likely to sell.