If you’ve found your next home but your current home hasn’t sold yet, you may need a way to unlock your equity fast to cover the down payment. In this situation, homeowners often weigh two main options: a bridge loan or a home equity line of credit (HELOC). While they’re often used for the same purpose, they differ in functionality.
Choosing between the two comes down to timing, certainty, and risk tolerance. Do you need a large lump sum tied directly to the sale of your home? Or would you rather have a more flexible credit line with less strict repayment terms if your home takes longer to sell than expected?
Bridge loan vs. HELOC: Quick comparison
A bridge loan is a relatively high-interest loan with a short term. It usually must be paid back in full within 6–12 months. It “bridges” the gap between the purchase of your next home and the sale of your current home. According to industry experts, the average bridge loan in 2025 was around $634,000, and demand for them is rising: bridge loans were up 31%, year-over-year.[1]
A HELOC, on the other hand, turns your equity into a revolving line of credit. You can draw only what you need for the down payment. The HELOC is secured by your current home, so it usually must be paid off in full when you sell the property.
| Bridge loan | HELOC | |
|---|---|---|
| Interest rate | Higher than conventional loans or HELOCs | Slightly higher than conventional loans but generally lower than bridge loans |
| Repayment | Interest-only or no payments over a short term but repayment required after 6–12 months | Following a draw period, you make monthly payments of both interest and principal or just pay it off once you sell the home |
| Qualification requirements | Higher credit score (mid-700s), lower DTI, substantial equity | High 600s credit score, moderate equity of at least 20% |
| Typical purpose | Buying next house before current house sells | Funding down payment for next house, home renovations, or consolidating other debt |
When does a bridge loan make the most sense?
A bridge loan makes the most sense when you need a short-term lump sum for a down payment on your next home and are confident your current home will sell quickly enough to repay the loan within 6–12 months.
For example, let’s say you’re selling your current home for $500,000. You’ve accepted an offer and found your next home, which costs $600,000. You need $90,000 for a down payment on your next home, but your buyer’s financing is taking a while because they’re a first-time buyer using a mortgage assistance program.
Taking out a bridge loan for $90,000 allows you to make a more compelling offer on your next home since it won’t have a sale contingency attached. Sellers don’t love sale contingencies since your offer is dependent on the whims of an unpredictable market.
When does a HELOC make the most sense?
If you're planning to buy a new home but haven't sold your current one yet, a HELOC can provide the funds you need for a down payment. As Bernie Frascarelli, executive loan officer at Best Interest Financial explained, the choice between a HELOC and a bridge loan "largely depends on the timing of selling one's current home." A HELOC works best "when the home is not yet on the market," while a bridge loan is typically used "when a property is about to sell and a quick closing on a new house is needed."
According to Frascarelli, "HELOCs are used more often than bridge loans" for this purpose, partly because bridge loans require "excellent financial standing" and come with less favorable terms. Bridge loans "must be paid back, often ballooning after three months," and typically carry higher rates.
This is why HELOCs are particularly attractive over a bridge loan if you have a low existing mortgage rate. Frascarelli says a HELOC is ideal for homeowners with rates "under 3%," allowing you to preserve your favorable financing while accessing equity for your down payment on a new property.
How do bridge loans and HELOCs affect your original mortgage?
Neither bridge loans or HELOCs directly affect your original mortgage. A bridge loan is a completely separate new loan, as is a HELOC. You’ll need to maintain payments on your original mortgage in addition to any monthly obligations connected to your bridge loan or HELOC.
When you sell your home, you’ll need to pay off the bridge loan or the HELOC in addition to your outstanding principal balance on your mortgage.
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FAQ about bridge loans and HELOCs
What happens if my home doesn’t sell before the bridge loan is due?
If your home doesn’t sell before the end of the bridge loan term, you will have to negotiate an extension or a restructuring. These will likely come with fees and a higher interest rate. Worse case scenario, the lender can foreclose on your home. This is why many people see a HELOC as a safer alternative to access home equity for their next home purchase.
Should I get a HELOC or use a sale contingency on my home offer?
If you’re in a competitive market, the seller will favor offers without sale contingencies. If you’re targeting a home that will have a lot of interest, using the proceeds from a HELOC (or a bridge loan) to make an offer will give you a better chance than an offer with a sale contingency.
Are there any prepayment penalties on bridge loans or HELOCs?
Yes, both bridge loans and HELOCs can come with prepayment penalties. If you close your HELOC during the initial draw period or if you pay back your bridge loan before the end of the term, you may be hit with a prepayment penalty. Always check with your lender about what the prepayment penalties are.
Do you just pay interest on a bridge loan?
Yes, some bridge loans require an interest-only monthly payment during the loan’s term; others may have no monthly payments. But keep in mind that many bridge loans require a balloon payment at the end of the loan term, which will be difficult to pay unless you have a lot of extra cash on hand or you’ve sold your previous home.
Disclaimer: The information provided in this article is for informational and educational purposes only. It is not intended as legal, financial, investment, or tax advice, and should not be relied upon as such. Mortgage rates, terms, products, and eligibility requirements are subject to change without notice and vary based on individual circumstances, credit profile, property type, loan amount, and other factors. All loans are subject to credit approval. This content does not constitute a commitment to lend or an offer of specific loan terms. For personalized mortgage advice and to discuss loan products that may be suitable for your situation, please contact one of our licensed loan officers.