How Bridge Financing Works, Step by Step
Program and regulatory figures verified September 19, 2026. Details change; confirm your scenario with us.
Bridge financing is simple in outline and easy to misuse. The mechanics matter mostly because they show what it can and cannot solve.
What it is
Short-term financing secured by the home you are leaving, sized against the equity in it. The proceeds go toward the down payment and closing costs on the new house. When the departing home sells, the bridge is repaid from the proceeds at that closing.
It solves a sequencing problem: the equity exists, but it is locked inside a house you have not sold yet.
How repayment works
Repayment is tied to the sale, so the term has to exceed the realistic marketing time rather than the hopeful one.
Michigan makes that unusually comfortable. A Grand Rapids seller at 22 mean days to pending, or a Lansing seller at 25, is sizing a term against a period measured in weeks. Even Traverse City, the slowest Michigan market we track, ran 41 days, inside the national benchmark of 53. Current figures on the market page.
How underwriting sees it
As another obligation. While the bridge is outstanding you may be carrying the departing home's mortgage, the bridge payment and the new mortgage at once, and all three sit in your debt-to-income ratio. Underwriting is not moved by the fact that two are temporary, and it does not discount a payment because the local market is fast.
Bridge financing converts illiquid equity into usable funds. It does not add income.
The Michigan detail worth knowing
A bridge loan does not affect the conditional rescission. The four conditions in MCL 211.7cc(5) concern occupancy, sale status, leasing and commercial use, not financing. So you can borrow against the departing home and still hold the principal residence exemption on both properties.
Separately, model the new home's tax line from state equalized value rather than the seller's bill, because it uncaps the year after the transfer. See the uncapping page.
Where it goes wrong
- The sale outlasts the term. The classic failure, and the least likely in Michigan.
- The file was already failing the two-payment test. Bridge financing was asked to fix an income problem it cannot fix.
- The loan was sized to the maximum available rather than the actual need.
- The new home's tax line was taken from the listing, so the payment was understated from the start.
Compare the alternatives on the structures page.
Frequently asked questions
What is a bridge loan?
Short-term financing secured by the home you are selling, used to access that equity before the sale closes so it can go toward the next purchase. It is repaid from the sale proceeds when the departing home closes.
Does a bridge loan help me qualify for a bigger mortgage?
No. It converts equity into usable funds but adds an obligation to your debt-to-income ratio rather than adding income.
How long should a Michigan bridge loan term be?
Longer than your market's current marketing time plus a closing period. For the month ending August 2026 that ranged from 22 days in Grand Rapids to 41 in Traverse City, so Michigan bridges are generally sized against weeks rather than months.
Will a bridge loan affect my principal residence exemption?
No. MCL 211.7cc(5) conditions the conditional rescission on the previous home being unoccupied, for sale, unleased and not used commercially. A lien recorded against it breaches none of those.
Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about financing, not a loan commitment and not legal, tax, or real estate advice. Principal residence exemption eligibility and conditional rescission rules depend on your facts; your local assessor, your CPA or a Michigan attorney, and your real estate agent each handle their own part. Loans are subject to borrower and property qualification.