How a Bridge Loan Actually Works
Program and regulatory figures verified September 25, 2026. Details change; confirm your scenario with us.
A bridge loan is a short-term loan against equity you already have, repaid from the sale of the home you are leaving. In Maryland, recording it is itself a taxable event.
The mechanic
You own a home with equity. You want to buy the next one before that equity is liquid. A bridge loan advances against the equity now so it can serve as a down payment, and it is repaid when the sale closes.
Because the exit is a sale rather than a payment schedule, the underwriting question differs from an ordinary mortgage. The lender is assessing whether the departing home will sell, at roughly what value, and in roughly what timeframe.
What it is not
A bridge loan is a loan. No lender is buying your home, nobody is promising it will sell, and nothing here puts a floor under your sale price. If the departing home sells for less than expected, that outcome is yours.
Where the cost sits, with a Maryland addition
- Closing costs on the bridge itself, incurred for a loan you intend to hold briefly.
- Maryland recordation tax on the increase in unpaid outstanding principal debt, under Md. Tax-Property 12-108(e), at the rate set by the county where the departing home sits. This one does not exist in most states and it is the reason Maryland movers compare structures more carefully.
- Carrying cost while both properties are in your name.
- Reserves, less a cost than a liquidity requirement, and the constraint most files actually meet.
We do not publish rate or pricing information on these pages. Pricing depends on the file.
The two alternatives
Carrying both payments and recasting afterward avoids a second lien entirely, and therefore avoids the recordation tax on the departing home. You qualify holding both, then apply the sale proceeds to principal and re-amortize.
Converting the departing home to a rental removes the timing dependency and likewise records nothing. Under Fannie Mae B3-3.8-05 the rental income can offset that property's own payment, though it never adds qualifying income. See the Form 1007 page.
Structures compared on the structures page, the tax on the recordation tax page, and see also bridge loan against a home equity line.
Frequently asked questions
How does a bridge loan get repaid?
From the sale proceeds of the home you are leaving. The loan is short-term by design and the exit is the sale, which is why underwriting evaluates the departing home's expected value and marketing time rather than only your income.
Is a bridge loan the same as a company buying my house?
No. A bridge loan is a loan against equity you already own. No lender purchases your home and no sale price is promised.
Does a bridge loan cost more in Maryland?
It carries a cost most states do not impose. Md. Tax-Property 12-108(e) applies recordation tax to a supplemental instrument to the extent it increases unpaid outstanding principal debt, so recording the lien is itself taxable on the new money, at county-set rates.
What are the alternatives to a bridge loan?
Qualify carrying both payments and recast the new loan after the sale, or convert the departing home to a rental where Fannie Mae B3-3.8-05 lets the rent offset that property's payment. In Maryland both avoid recording a new lien on the departing home.
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. Maryland recordation tax rates are set by each county and Baltimore City, and the Homestead Tax Credit is administered by the State Department of Assessments and Taxation; your county finance office, your CPA or a Maryland attorney, and your real estate agent each handle their own part. Loans are subject to borrower and property qualification.