Bridge Loans are a type of short-term loan that is frequently used in real estate transactions. The purpose of a bridge loan is to provide funding for a new property purchase while the borrower is still in the process of selling their existing property. These loans act as a "bridge" between the two transactions and are typically used to finance the closing costs of the new property and the down payment.

The purchased property secures Bridge Loans and is generally offered at higher interest rates than traditional mortgages. This is because they are short-term loans and carry a higher risk for the lender. The loan amount is based on the equity of the borrower's current property and the value of the property being purchased.

Bridge Loans are typically used by real estate investors who must act quickly to secure a new property before it is sold to someone else. They are also used by individuals who need to purchase a new property before their existing property is sold, such as those who are moving for work or upgrading to a larger home.

One of the main advantages of Bridge Loans is their speed and flexibility. They can be approved and funded quickly, allowing borrowers to take advantage of time-sensitive opportunities. Additionally, they often have less stringent underwriting requirements than traditional mortgages, making them easier to obtain.

However, Bridge Loans also have some disadvantages. They typically have higher interest rates and fees, making them more expensive than traditional mortgages. They also carry a higher risk for the borrower, as they may be required to make loan payments on two properties simultaneously if their existing property takes longer than expected to sell. Hence, they should be carefully considered against other financing options to determine if they best fit the borrower's needs and financial situation.