California mortgage guide
Bridge Loans for California Home Buyers: Buying Before You Sell
In this guide
A bridge loan is short-term financing — usually 12 months or less — secured by the home you already own, used to buy your next home before the current one sells. It trades cost for time and certainty: it lets you make an offer without a sale contingency, and it must be repaid, normally from the sale of the home you are leaving.
Key numbers
| Item | Figure | Source |
|---|---|---|
| Term that keeps a bridge loan outside the federal ability-to-repay rule | 12 months or less | 12 CFR 1026.43(a)(3)(ii) (Regulation Z) |
| Right to cancel | 3 business days after signing, when the loan is secured by your current main home | Regulation Z §1026.23 and comment 23(a)(1)-4 |
| Prop 19 base-year transfer window | Buy the replacement home within 2 years of selling the original home | California BOE — Proposition 19 |
| Prop 19 transfers allowed | Up to 3 times for age-55 and disabled homeowners (disaster victims are not limited the same way) | California BOE — Proposition 19 |
Who a bridge loan fits — and who should look elsewhere
A bridge loan fits a homeowner with substantial equity in the current home, a realistic sale ahead, and a specific reason to buy first: a downsize that must happen on a medical or family timetable, a purchase in a neighbourhood where homes rarely come up, or an offer that only works without a sale contingency. The equity is doing the work — bridge underwriting is driven more by the value in the departing home and the credibility of the exit (the sale) than by a standard income file.
Look elsewhere when the current home may not sell near its expected price, or when carrying two homes would strain you. While the bridge is open you are paying on the new home's financing and the bridge loan, and still paying tax, insurance, and upkeep on the old home. Alternatives that fit many households better: a home equity line on the current home (drawn only if an offer is accepted), a contingent offer in a slower segment, or selling first with a negotiated rent-back so you shop with cash in hand and no deadline.
Requirements: program rules and lender overlays
There is no agency bridge-loan program. Fannie Mae, FHA, and VA do not set bridge-loan rules. Bridge loans are portfolio or private products, so every term that matters — maximum combined loan-to-value across both homes, interest-only or amortising payments, the balloon date, extension terms and their price, prepayment terms — comes from the individual lender's own program sheet. That is the overlay problem in its purest form: there is no program rulebook behind the lender's sheet to appeal to.
The federal rules that still apply. Two Regulation Z points shape every bridge file. First, a temporary or bridge loan with a term of 12 months or less is exempt from the federal ability-to-repay requirements in §1026.43(c) through (f). The lender is not required to document your ability to repay the way a standard mortgage lender must — which means the discipline has to come from you. Second, because the loan is secured by your current main home while you acquire a new one, the right of rescission applies: you have three business days after signing to cancel, and the lender cannot fund until that period passes. Build those three days into your purchase timeline.
Your permanent loan is a separate file. The bridge loan buys time; it is not the long-term financing on the new home. Qualify for the permanent mortgage — purchase loan or, for eligible homeowners 62 and over comparing options, a HECM for Purchase — on its own terms before you commit to the bridge, so the exit works at both ends.
What a bridge loan costs
| Cost | How it works |
|---|---|
| Interest | Priced by the individual lender well above standard mortgage pricing, because the loan is short, equity-driven, and repaid from a sale that has not happened yet. Payments are commonly interest-only. Get the rate, the payment, and the total interest to the balloon date in writing. |
| Points and lender fees | Bridge programs commonly charge origination points plus underwriting and valuation fees. Ask whether points and fees can be financed or must be paid in cash — programs differ, and some consumer bridge programs prohibit financing them. |
| Valuation | An appraisal, or a broker price opinion on some programs, on the departing home — sometimes on both homes. |
| Double carrying costs | Two sets of property tax, insurance, and maintenance for the overlap months, plus moving once. This is a real cost of the strategy even though no lender charges it. |
| Extension risk | If the departing home has not sold by the balloon date, an extension — if the lender offers one — is priced by the lender, on the lender's terms. There is no right to extend. |
California specifics
Prop 19 can be worth more than the bridge loan costs. A homeowner who is 55 or older, severely disabled, or a victim of a Governor-declared disaster can transfer the taxable value of their current main home to a replacement home bought within two years of selling, anywhere in California. If the replacement costs the same or less, the old taxable value carries over whole. If it costs more, the amount above the old home's market value is added to the transferred value: replacement at $1,100,000 against an original sold at $1,000,000 adds $100,000 to the transferred taxable value. Age-55 and disabled homeowners may use the transfer up to three times. For a long-held California home with a low Prop 13 base, this transfer can save more over the coming years than the entire cost of bridging — and it only works if the sale and purchase happen inside the two-year window, which is one more reason the bridge timeline needs care.
Selling a vacant home. Buying first lets you move out, prepare, and show the departing home empty — in much of California that presentation is worth real money, and it removes the disruption of showings while you live there. Weigh that against the double carrying costs above; both belong in the same calculation.
Worked example: the overlap, in numbers
A couple sells a home worth $1,100,000 with a $400,000 mortgage — $700,000 of equity — and buys a $950,000 home first.
- Equity available in the departing home: $1,100,000 − $400,000 = $700,000.
- They take a bridge loan of $300,000 against the departing home to fund the down payment and closing costs on the purchase, keeping the rest of the equity untouched until the sale.
- Combined loan-to-value on the departing home while the bridge is open: ($400,000 + $300,000) ÷ $1,100,000 = 63.6%.
- The departing home sells four months later. From the $1,100,000 sale: the $400,000 mortgage and the $300,000 bridge loan are repaid, leaving $400,000 before sale costs — which becomes the principal reduction or reserve for the new home.
The two numbers to stress-test before signing are the sale price and the calendar. If the departing home sells for $1,000,000 instead, the same repayments leave $300,000 — the plan still works. If it has not sold when the bridge balloon arrives, the plan depends entirely on the extension terms you negotiated at the start. Run the disappointing versions of the example, not just the expected one.
How a bridge purchase proceeds
- Qualify the permanent loan first. The long-term financing on the new home must stand on its own.
- Value both homes honestly. The lender will order its own valuation of the departing home; your plan should use a conservative figure.
- Apply for the bridge loan and read the exit terms. Balloon date, extension terms, prepayment terms, and what happens if the sale falls through — in writing.
- Sign and wait out rescission. Three business days after signing, the loan can fund. Schedule the purchase closing after that window.
- Close the purchase, then sell the departing home. The bridge is repaid from the sale proceeds at that closing.
Common mistakes
- Assuming federal ability-to-repay rules protect you. A bridge loan of 12 months or less is exempt from §1026.43(c)–(f). If the exit fails, "the lender should not have lent it" is not a defence — the repayment obligation is yours.
- Forgetting the three-day rescission in the purchase timeline. A bridge loan secured by your current home cannot fund the day it signs. A purchase contract written around same-day funding will miss its date.
- Pricing the departing home at the optimistic number. Every month of overlap costs the bridge interest plus two homes' taxes, insurance, and upkeep. A price that sells in the first month is usually worth more than a higher price that takes six.
- Letting the Prop 19 window drift. The base-year transfer needs the replacement bought within two years of the sale of the original home. A leisurely sequence can quietly forfeit the largest saving in the whole move.
Questions buyers ask
How long do I have to repay a bridge loan?
Bridge loans are short-term — a term of 12 months or less is the structure that sits outside the federal ability-to-repay rule, and programs are built around repaying from the sale of your current home inside that window.
Can I cancel a bridge loan after signing?
Yes. When the loan is secured by your current main home, you have three business days after signing to rescind, and the lender cannot disburse until that period passes.
Do I qualify on income or on equity?
Bridge programs are equity-driven: the value in the departing home and the credibility of the sale as an exit matter most. Your permanent loan on the new home is underwritten normally, on income and credit.
What if my home does not sell in time?
The loan comes due at its balloon date. Any extension is the lender's choice, at the lender's price. That is why the extension terms belong in your hands before you sign, and why the sale price should be set to move.
Can I keep my low property-tax base when I move?
Often, yes. Under Prop 19, homeowners 55 or older, severely disabled homeowners, and disaster victims can transfer their taxable value to a replacement home bought within two years of selling, anywhere in California — adding any amount by which the new home's price exceeds the old home's market value.
Is a HELOC a cheaper bridge?
For many households, yes: a home equity line on the current home, drawn only when an offer is accepted, avoids bridge pricing. Compare both against the same purchase before deciding.
Sources
- CFPB, Regulation Z §1026.43 — paragraph (a)(3)(ii): temporary or bridge loans of 12 months or less (fetched October 14, 2026).
- CFPB, Regulation Z §1026.23 — right of rescission; comment 23(a)(1)-4 covers loans secured by the current main dwelling to acquire a new one (fetched October 14, 2026).
- California State Board of Equalization — Proposition 19: base-year value transfers under Revenue and Taxation Code §69.6 (fetched October 14, 2026).
Last reviewed October 15, 2026. Questions: call 415-297-6703 or use the contact page.
A California mortgage question? Talk with Loi directly.
A consultation is a conversation, not an application. Loi will walk through your numbers, say plainly whether the loan fits, and tell you what it would take to qualify — whether or not you move forward. No credit pull to start.
Call Loi — 415-297-6703 Get a consultation Apply with Loi at Loan Factory