HELOC vs Bridge Loan: Which One Do You Actually Need?

You found your dream home. Problem: your current home hasn't sold yet. You need to tap your equity NOW to make the down payment, but which option makes sense — a HELOC or a bridge loan?

Both use your home equity. Both can help you buy before you sell. But they're fundamentally different tools designed for different situations. Let's cut through the confusion.

The Core Difference in 30 Seconds

Bridge loan: Short-term sprint. Get a lump sum for 6-12 months at higher rates (8.5-10.5%). Designed specifically for buying your next home before selling your current one. You're expected to pay it off quickly once your home sells.

HELOC: Long-term marathon. Flexible credit line for 10+ years at lower rates (~7.44%). Draw what you need, when you need it. No forced timeline.

Same equity source. Completely different tools.

What Is a Bridge Loan?

A bridge loan "bridges" the gap between buying your new home and selling your current one. It's temporary financing with a clear purpose and forced timeline.

Bridge loan characteristics:

• Term: 6-12 months (rarely longer)
• Rates: 8.5-10.5% (higher than HELOC)
• Structure: Lump sum disbursement
• LTV: Up to 80% combined (both properties)
• Payments: Often interest-only until payoff
• Exit strategy: Pay off when your home sells

Bridge loans often require you to have your current home listed for sale. Lenders want to see your exit plan.

What Is a HELOC?

A HELOC is a revolving credit line secured by your home equity. Think of it like a credit card backed by your house — but with much better rates.

HELOC characteristics:

• Term: 10-year draw + 20-year repayment (typical)
• Rates: ~7.44% average (variable)
• Structure: Draw what you need, when you need it
• LTV: Up to 80-85% of home value
• Payments: Interest-only on what you draw during draw period
• Exit strategy: None required — repay on your timeline

No one's going to ask when you plan to pay it off. It's your credit line to use as you see fit.

Side-by-Side Comparison

When a Bridge Loan Wins

Bridge loans cost more. So when do they make sense?

Competitive market, tight timeline: You found the perfect home. Multiple offers incoming. You need to make a non-contingent offer NOW. A bridge loan lets you act fast without a sale contingency weakening your bid.

90-day close or less: If you know your current home will sell within 3 months, the higher rate for a short period may be worth the certainty.

You need the full amount immediately: Bridge loans disburse the entire amount at closing. If you need $150K for a down payment tomorrow, that's what you get.

Your lender requires it: Some lenders won't approve a mortgage for your new home with a HELOC in place. Bridge loans structure the debt differently.

When a HELOC Wins

For most homeowners, HELOC is the smarter choice. Here's why:

You have flexibility on timing: No pressure to sell by a specific date. Take three months, six months, or longer — your HELOC doesn't care.

Lower total cost: Even if you use the funds for the same period, 7.44% beats 10% every time. On $100K over 6 months, that's ~$1,300 in savings.

You might not need all the funds: With HELOC, draw $50K if that's all you need. Bridge loans give you the whole lump sum whether you use it or not (and charge interest on all of it).

Multiple uses: Use part for down payment, part for moving costs, part for repairs on your new home. One credit line, infinite flexibility.

Long-term backup: If your home takes longer to sell than expected, your HELOC keeps working. Bridge loans have maturity dates that can create pressure.

The Hybrid Approach

Savvy homeowners sometimes use both:

1. Open a HELOC first (while you're shopping for homes)
2. Use HELOC for earnest money and initial costs
3. Get a bridge loan only if you need to close fast on a competitive property
4. Pay off bridge loan immediately when your home sells
5. Keep HELOC open for future flexibility

This gives you maximum options without committing to bridge loan rates until you absolutely need them.

Can You Use a HELOC as a Bridge Loan?

Absolutely. That's exactly what many homeowners do.

Use your HELOC to:

• Make the down payment on your new home
• Cover closing costs
• Handle dual mortgage payments temporarily
• Pay for repairs or updates

Once your old home sells, pay down the HELOC balance. You've effectively "bridged" the gap at a lower rate with more flexibility.

The main limitation: HELOC funding can take 2-4 weeks. If you need money faster, bridge loans sometimes close quicker (though not always).

What About Bridge Loan Interest Rates?

Bridge loan rates are higher because:

• Short-term lending is riskier for the lender
• Less competition in the bridge loan market
• Specialized product with higher overhead
• Higher default risk (borrower is juggling two properties)

Expect 8.5-10.5% depending on:

• Your credit score
• Combined LTV across both properties
• Whether your current home is listed
• Your exit plan (accepted offer vs. hoping to sell)

The Bottom Line

Choose a bridge loan if:

• You need funds in under 2 weeks
• You're buying in a hyper-competitive market
• You have an accepted offer and closing date on your current home
• Your lender requires bridge structure

Choose a HELOC if:

• You have 3+ weeks before you need funds
• You want flexibility on when you sell
• You want lower rates and costs
• You might use the funds for multiple purposes

For most homeowners buying before selling, a HELOC provides the same functionality as a bridge loan at lower cost with more flexibility. The bridge loan premium only makes sense when timing is extremely tight.

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Ready to Tap Your Home Equity?

HonestCasa's digital HELOC lets you access your equity in as little as 7 days — no branches, no hassle. If you've got flexibility in your timeline, why pay bridge loan rates?

[Check Your Rate in Minutes →]

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FAQs

Can I use a HELOC as a bridge loan?

Yes. Many homeowners use their HELOC to cover down payments and dual mortgage periods, then pay it down when their old home sells. Same function, lower rates, more flexibility.

What are bridge loan interest rates?

Typically 8.5-10.5%, compared to ~7.44% for HELOCs. The premium reflects the short-term, specialized nature of bridge financing.

How fast can I get a bridge loan vs HELOC?

Bridge loans sometimes close in 2-3 weeks. HELOCs typically take 2-4 weeks, though digital lenders like HonestCasa can fund in as little as 7 days.

Do I need to sell my home to get a bridge loan?

Most lenders require your home to be listed or at least have an exit strategy. They want confidence you'll repay within the 6-12 month term.