When selling your home, you'll ideally want to time the sale so that it corresponds well with the purchase of your next residence. When you complete the sale, the proceeds can go towards a down payment on your new home, allowing you to seamlessly move from one address to another.

Unfortunately, the process doesn't always work this smoothly. In one common scenario, the seller has purchased a new home but has not been able to find a buyer for their former property. They might find themselves burdened with mortgage payments on both the new home and old home, or they might not even have enough money for the down payment until their previous home sells.

There are several ways to help a seller into their new home if a buyer is not forthcoming before their own purchase. Bridge loans, as their name suggests, help span any financial gap between selling an old home and buying a new one.

This type of loan uses your previous residence as collateral to borrow money for the purchase of a new one. Michele Lerner, writing for the National Association of Realtors, says bridge loans often combine the mortgage payments for your previous home and for your new one into a single loan. Tony Guerra, writing for SFGate, says bridge loans might also cover only the mortgage payments of your previous home plus a down payment on a new one, or borrow against your former home's equity to acquire funds for a down payment.

A borrower can be approved for a substantial amount of money when getting a bridge loan. Lisa Kaplan Gordon, also writing for the National Association of Realtors, says the loan will finance up to 80 percent of the combined value of the home you are selling and the one you are buying. You'll need to make up the remaining 20 percent from savings, a home equity loan, or some other source of funds.

When you sell your previous home, the funds can be applied to the bridge loan. As long as your home sells for an adequate amount, the proceeds can pay off this secondary loan and cover the balance of your old mortgage.

One big advantage of a bridge loan is that it allows you to buy a new home without financing. This can strengthen your offer and allow you to move into the home more quickly. However, Lerner says you might need to apply for new financing once your previous home has sold, in which case you'll pay closing costs for both the bridge loan and the new mortgage.

A bridge loan can also allow you to avoid making mortgage payments on two homes at once. Guerra says you can focus on making payments on your new home, then pay off the bridge loan and its accrued interest after your old home sells.

Bridge loans are meant to be a temporary measure to help sellers with a source of funds, and many will expire after six months. Gordon says the loans may also be arranged to be as short as three months or as long as a year, and that lenders are often willing to extend the deadline.

One key disadvantage to a bridge loan is high interest rates. Guerra says their rates are often at least 2 percentage points higher than a comparable rate for a 30-year fixed rate mortgage. The fees associated with a bridge loan can also be much higher, and some may come with prepayment penalties.

It can be quite difficult to qualify for a bridge loan. Gordon says you'll typically need a very high credit score as well as a low debt-to-income ratio.

Putting your home up as collateral also carries significant risk. If you can't sell your home within the bridge loan's time period, the lender can foreclose on the property. Alternatively, the home may sell for less than expected, leaving you to pay the difference on the bridge loan.

A bridge loan can be a good option if you are confident that you can find a buyer within the loan's timeframe. If not, you can consider other options for moving from one residence to another. One possibility is to temporarily move into a rental home after selling to give yourself more time to find a new residence. Michael D. Larson, writing for the financial site Bankrate, says you might also consider other financial resources—such as a 401(k), investments, or borrowing from a friend or family member—to come up with the necessary funds.