Both use the equity in your current home to fund the next one. A HELOC usually costs less but has to be in place before you list; a bridge loan costs more but is built for exactly this, and is paid off when your home sells.
Side by side
| Bridge loan | HELOC | |
|---|---|---|
| Built for | Buying before selling, repaid from the sale | Borrowing against equity for any purpose |
| Timing | Can be arranged once the home is listed or under contract | Usually must be opened before the home is listed |
| Cost | Higher rate and fees | Lower |
| Monthly payments | Often interest only or deferred until the sale | Required, usually interest only while you draw |
| Qualifying | Many lenders look past the old payment, knowing the sale will repay it | The new payment counts in your debt-to-income ratio |
| When it ends | At the sale, or a set term of months | Stays open until you close it |
When a bridge loan fits
- Your home is already listed or under contract.
- Your income can’t carry both mortgages and a new payment.
- You want the bridge paid off automatically when the home sells.
When a HELOC fits
- You’re planning ahead and haven’t listed yet.
- You want the lowest cost.
- Your income covers both housing payments for a few months.
Guides and calculators
- Construction & bridge loans
- Bridge loan equity calculator
- Second mortgages & HELOCs
- Cash-backed offers
- Home sale proceeds calculator
Questions
What is a better alternative to a bridge loan?
A HELOC opened before you list, a buy-before-you-sell program, or an offer contingent on selling your home. Each trades cost against how strong your offer looks to the seller.
Is it hard to qualify for a bridge loan?
Usually easier than people expect if your home has solid equity: the lender relies mostly on that equity and the coming sale, though you still need acceptable credit and reserves.
What is the downside of a bridge loan?
Cost: a higher rate and fees for a short time, and if the sale takes longer than planned, you carry both homes longer. Pricing your home to sell protects you. See also: Home sale proceeds calculator.
