Buying and selling real estate at the same time is stressful, right? Especially when you haven’t sold your current home but already found the perfect new one. That’s where people often turn to bridging loans. They offer a quick fix—a way to secure a down payment for the new property before finalizing the sale of the old one. But here’s the kicker: bridge loans can be expensive, risky, and, frankly, not always worth the headache.
So what’s the smarter, more flexible alternative?
Enter the HELOC (Home Equity Line of Credit)—a powerful, lesser-known financing tool that gives you access to your home’s equity without locking you into high interest rates or rigid terms. In this guide, we’ll explore how HELOCs work, how they compare to bridge loans, and why more and more homeowners are making the switch.
What is a Bridging Loan?
A bridging loan is exactly what it sounds like: a temporary financial bridge between the purchase of a new property and the sale of an existing one. It’s short-term, fast, and usually secured against the property you already own. You typically repay it once your old property sells.
Pros of a Bridging Loan:
Fast approval and funding
Helps you buy a new home before selling the old one
Useful in competitive markets where timing is key
Cons of a Bridging Loan:
High interest rates (often 8–12%)
Short repayment terms (usually 6–12 months)
High fees and closing costs
Potential for double mortgage payments
If your old home doesn’t sell, you’re on the hook
It’s a great tool in theory. But in practice? It can leave you financially overextended.
Why Look for Alternatives to Bridge Loans?
Let’s be real. While bridge loans offer speed, they come with significant downsides that make them risky for many homeowners and investors.
Why bridge loans can be problematic:
Short timeline: You’re pressured to sell your current home fast.
Higher interest: Much more expensive than traditional mortgages or home equity options.
Limited usage: Usually only available for real estate transactions.
Strict qualifications: You need strong credit, low debt, and plenty of equity.
Risk of foreclosure: If your old property doesn’t sell in time, you could default.
This is why many borrowers start looking for more flexible, lower-cost options—like HELOCs or home equity loans.
Introduction to HELOC: A Smarter Option?
A HELOC (Home Equity Line of Credit) works like a hybrid between a credit card and a second mortgage. It allows you to borrow against the value of your home, giving you access to a revolving credit line you can tap into whenever you need—whether it’s for a new down payment, renovations, or debt consolidation.
Unlike bridge loans, HELOCs are:
Longer-term
More affordable
More flexible
You borrow only what you need, when you need it—and repay as you go.
How Does a HELOC Work?
A HELOC has two key phases:
1. Draw Period (typically 5–10 years):
You can borrow money multiple times up to your credit limit.
Payments are usually interest-only, making monthly costs low.
As you repay, that credit becomes available again.
2. Repayment Period (10–20 years):
You can no longer borrow.
You begin repaying principal + interest, which increases monthly payments.
This two-part structure makes HELOCs incredibly budget-friendly in the short term, while still offering long-term repayment stability.
Credit Limits: How Much Can You Borrow with a HELOC?
The amount you can borrow is based on the equity you have in your home. Most lenders let you borrow up to 80–85% of your home’s value, minus your existing mortgage.
Example:
Home Value: $600,000
Mortgage Balance: $350,000
80% of Home Value: $480,000
Maximum HELOC: $480,000 – $350,000 = $130,000
You don’t need to take the full amount upfront. Just borrow what you need—and only pay interest on that portion.
Interest-Only Payments: What Makes HELOCs Appealing
One of the biggest perks of a HELOC is the ability to make interest-only payments during the draw period. This keeps monthly payments low and manageable.
Let’s break it down:
Borrowed Amount: $50,000
Interest Rate: 6%
Monthly Payment (Interest-Only): $250
Compare that to a bridge loan, where you’re paying both principal and interest on a much shorter timeline—and often at double the rate.
HELOC vs Bridging Loan: A Head-to-Head Comparison
Here’s a side-by-side look at how these two options stack up:
| Feature | HELOC | Bridging Loan |
|---|---|---|
| Loan Type | Revolving credit line | Lump sum short-term loan |
| Interest Rate | Typically 5–8% (variable) | 8–12%+ (fixed or variable) |
| Repayment Term | 10–30 years | 6–12 months |
| Monthly Payments | Interest-only (draw period) | Principal + interest |
| Approval Time | 2–4 weeks | 5–10 days |
| Flexibility | Borrow as needed | One-time lump sum |
| Risk of Double Mortgage | No | Yes |
| Collateral Required | Yes (your home) | Yes (your home) |
HELOCs win on flexibility, affordability, and long-term stability.
Use Cases: When a HELOC Makes More Sense
A HELOC isn’t just for buying property. Its flexibility makes it a powerful tool for various financial needs:
Home renovations: Add value to your property over time.
Bridge financing: Temporarily fund your next home while selling the old one.
Debt consolidation: Pay off high-interest credit cards or personal loans.
Emergency expenses: Medical bills, major repairs, or education costs.
Real estate investing: Use your home’s equity to fund rental or flip projects.
Basically, if you need ongoing access to capital, a HELOC is your best friend.
Who Qualifies for a HELOC?
To get a HELOC, you typically need:
15–20% equity in your home
Credit score of 660+ (higher gets you better rates)
Low debt-to-income ratio (DTI) – usually below 43–50%
Steady income and strong repayment history
If you meet these requirements, you’re likely to get approved—often with favorable terms.
The Flexibility Advantage: Borrow When You Need
Imagine having a $100,000 line of credit ready, but only needing $10,000 this month. No problem—borrow $10K, and your payments reflect only that. Need another $5K next month? Use it again. That’s the power of revolving credit.
This is particularly useful for:
Staggered renovation costs
Covering gaps between home sale and purchase
Managing seasonal or business income fluctuations
With a bridge loan, you’d get one lump sum—and the pressure to repay it starts immediately. A HELOC gives you control over your cash flow.
Potential Downsides of HELOCs
Nothing’s perfect. HELOCs come with their own set of risks:
Variable interest rates: Your payments can increase over time.
Foreclosure risk: Your home is collateral, just like with a bridge loan.
Temptation to over-borrow: Like a credit card, it’s easy to misuse.
Closing costs: Some lenders charge fees for appraisal, origination, or annual maintenance.
The key is to borrow responsibly and have a repayment plan in place.
Home Equity Loans vs HELOCs vs Bridge Loans
Here’s a quick breakdown of your options:
| Loan Type | Fixed or Revolving | Lump Sum or Ongoing | Term Length | Best For |
|---|---|---|---|---|
| HELOC | Revolving | Ongoing | 10–30 years | Flexibility, ongoing expenses |
| Home Equity Loan | Fixed | Lump sum | 5–15 years | Large one-time costs |
| Bridge Loan | Fixed/Variable | Lump sum | 6–12 months | Quick home purchase before sale |
Tips to Decide: Is HELOC Right for You?
Ask yourself:
Do I need flexible access to cash over time?
Can I handle variable interest rates?
Am I financially disciplined enough to borrow only what I need?
Do I have enough equity and good credit?
If yes, a HELOC could be a safer, smarter option than a bridge loan.
The Future of Property Financing
Bridge loans have their place. But unless you’re in a real estate crunch and need lightning-fast funding, a HELOC is usually the better choice. It’s flexible, affordable, and adaptable to your financial needs. Whether you’re renovating, investing, or managing the timing between selling and buying, a HELOC puts you in the driver’s seat—without the high costs and stress of a bridge loan.
When it comes to leveraging your home’s value wisely, HELOCs are hands-down the smarter tool for the modern homeowner.