 TITLE: What Is a Bridge Loan? CONTENT: How Bridge Loans Work\n---------------------\nIf you currently own a home and are looking to buy a new one, the process can be tricky. In an ideal world, you'd sell your current home just in time to use the proceeds to make a down payment on the new one. But if that doesn't happen, the transitional process can become extremely stressful—unless you get a bridge loan.\nA bridge loan is a short-term loan—repayment terms are typically less than 12 months—that can provide you with the cash you need to buy your new home whether or not you've managed to complete the sale of your old one. Here's how the process might work:\n1.  Gain access to the equity in your current home through a bridge loan.\n2.  Make a down payment on your new home using the proceeds from the loan.\n3.  Sell the old home and use the profit from the sale to pay off the bridge loan.\nWith a bridge loan, you can typically qualify for up to 80% of the loan-to-value ratio of your current home. So if you don't have at least 20% equity, you may not qualify right off the bat. If you do, but just barely, you may not get enough proceeds from the loan to make it worth your while.\nBridge loans typically charge high interest rates compared with other home equity financing options, primarily because they're short-term loans. As a result, you may get an interest rate that's a few percentage points higher than on a conventional mortgage or home equity loan. Fees can also be relatively high, increasing the total cost of credit.\nFinally, bridge loan lenders tend to have high eligibility criteria, both in terms of credit and debt-to-income ratios, especially if there's a chance you'll have two mortgage payments for a while. END