Bridge Loans or Swing Loans
Bridge loans are also called swing loans. They are used when you have a home for sale and need the proceeds from the sale to purchase a new home.
If your current home doesn't sell in time, you can get a bridge loan, which uses that home as collateral and allows you to close on the new house.
A bridge loan pays off the old mortgage and goes toward the down payment on the new home. When the old home does sell, you pay off the bridge loan and continue paying the traditional mortgage on the new home.
The lender who is financing your new home must issue the bridge loan, and it usually has a one year term and a lot of prepaid interest, sometimes as much as six months.
If the home sells before that time, you may receive interest payments back, but if it hasn't sold, you may be required to continue making interest only payments.