Which type of loan allows borrowing against the current home to purchase a new house?

A bridge loan is specifically designed to allow homeowners to borrow against the equity of their current home in order to finance the purchase of a new property. This type of loan serves as a temporary financing solution, often used when the homeowner is looking to buy new property before selling their existing home. It is intended to "bridge" the financial gap that can occur during this transition period.

The key feature of a bridge loan is that it leverages the existing home equity to provide the necessary funds for a down payment or to cover the initial costs associated with the new purchase. Typically, these loans are short-term, allowing the borrower to pay them off once their existing property is sold.

In contrast, a home equity loan is a second mortgage that allows homeowners to borrow against their current home’s equity but does not inherently facilitate the purchase of a new home. FHA loans and conventional loans pertain to specific types of financing for purchasing homes rather than leveraging current properties for new purchases.