Bridge Loan vs. HELOC: Which One Gets You Into the Next House First?

You've found the next house and you haven't sold the current one. Your down payment is sitting in the walls of the home you live in. Two tools can get it out before the sale: a bridge loan and a home equity line of credit. They solve the same problem in different ways, and picking the wrong one usually costs either money or the house.

A HELOC is a revolving second lien on your current home. You draw what you need for the down payment, pay interest only on what you've drawn, and pay the line off when the home sells. Costs are low — often minimal closing costs and a variable rate tied to prime. The catches are timing and qualification. Most lenders will not open a HELOC on a property that is listed for sale, and some will ask whether you intend to sell. Approval takes weeks, not days. So a HELOC is a tool you set up before you start shopping, not after you've gone under contract.

A bridge loan is a short-term loan — typically six to twelve months — secured by your current home, sometimes by both homes. It's designed to be repaid from the sale. Payments are often interest-only, and some programs defer them entirely until payoff. Rates are higher than a HELOC and there are origination fees, but a bridge lender expects the home to be for sale and underwrites around it. Approval is generally faster.

• Cost: HELOC wins. Lower rate, few fees. A bridge loan carries a higher rate plus points.
• Speed: bridge loan wins. HELOCs commonly take several weeks.
• Home already listed: bridge loan. Most HELOC lenders will decline.
• Flexibility: a HELOC can be drawn as needed and kept as a safety net; a bridge loan is a single-purpose lump sum.
• Payments while you own both homes: bridge loans more often offer deferred or interest-only structures.
• Risk if the home doesn't sell: both remain secured by your home — a bridge loan has a hard maturity date, a HELOC doesn't.

Whichever you choose, the lender on the new home will ask where the down payment came from and will generally count the new payment, plus your existing mortgage, in your debt-to-income ratio. That's the real constraint for many buyers: carrying two homes on paper. Some programs will exclude the departing home's payment if it's under contract, and Non-QM options give more room on ratios. I walk through the full set of strategies in how to buy before you sell.

Traditional HELOC and bridge lenders qualify on tax returns, which understates income for most business owners. A bank statement HELOC uses deposits instead, and the purchase of the new home can run through the bank statement program as well.

• A cross-collateral loan pledges equity in the current home toward the new purchase without a separate loan.
• A piggyback loan reduces the cash needed at closing.
• Buy with a smaller down payment now, then apply the sale proceeds and recast the mortgage to lower the payment.

The rule of thumb: if you're planning ahead and the home isn't listed, a HELOC is usually the cheaper bridge. If you're already under contract or already listed, a bridge loan is the one that's still available. Tell me where you are in the timeline and I'll map the options to it. Terms and availability vary by lender.