Bridge Loan vs. HELOC vs. Cash-Out Refinance.
Which one funds your next home purchase?
Three real ways to access the equity in your current home for the down payment on your next one. Each works for a different situation, and picking the wrong tool can cost you tens of thousands. Here is how to actually decide.
Quick comparison at a glance.
Three tools, three very different fits. The full reasoning for each is below, but here is the summary.
Best when your existing first mortgage rate is well below today is, and your sale timing is uncertain. Variable rate, low fees, draw what you need.
Worst when you need maximum predictability or the largest possible cash-out.
Best when your existing rate is similar to or higher than today is, and you want a single fixed-rate loan covering your existing balance plus the equity you are pulling.
Worst when your existing rate is meaningfully better than the market — you are giving up a low rate.
Best when your timeline is tight, your sale is likely soon, and you want a clean instrument that closes fast and pays off when your home sells.
Worst when your timeline is uncertain or your sale could stretch past the bridge term.
When a HELOC is the right tool.
A home equity line of credit is a second loan on your current home. Your existing first mortgage stays exactly as it is, which is critical when you have a low rate locked in. You only pay interest on what you draw, and you can pay it back early without penalty in most programs.
Where it shines: you are not sure exactly when your current home will sell, you want to draw equity in stages, and you do not want to disturb a low-rate first mortgage. The classic move is to draw enough for the down payment on the next home, close the next purchase, then list and sell the current home and use the proceeds to pay off the HELOC.
Where it does not work: you need maximum cash with maximum predictability, or your credit profile makes the HELOC pricing unattractive compared to a refinance.
When a cash-out refinance is the right tool.
A cash-out refinance replaces your existing first mortgage with a new, larger one. You take the difference between the new loan and your old balance as cash. The whole loan is fixed-rate (or whatever term you choose) and you have one monthly payment instead of two.
Where it shines: your existing rate is not meaningfully better than today is, you want long-term fixed-rate certainty, and you are pulling a substantial amount of equity. Also useful when you plan to keep the current home as a rental rather than selling — the refinanced mortgage is part of the long-term plan, not a temporary tool.
Where it does not work: you have a sub-four-percent rate locked in. Refinancing into a higher rate to access equity is almost always more expensive than a HELOC over realistic timelines, even though the HELOC rate is technically higher.
When a bridge loan is the right tool.
A bridge loan is short-term financing — typically six to twelve months — built specifically to span the gap between buying a new home and selling the current one. It is structured around your sale timeline, often with interest-only payments during the bridge period and a lump-sum payoff when your home sells.
Where it shines: your sale timing is reasonably predictable (already listed, likely already in talks with potential buyers, or you have an aggressive pricing strategy), and you want a clean instrument designed exactly for this scenario. Bridge loans usually close faster than HELOCs and require less long-term commitment than a cash-out refi.
Where it does not work: your sale timeline is uncertain or could realistically stretch past the bridge term. The cost of extending or refinancing a bridge loan that runs long can erode the benefit.
How to actually pick one.
Three honest questions usually narrow this down to one obvious answer.
- What is your existing rate? Sub-five percent: protect it. Use a HELOC or bridge. Above six percent: cash-out refi is back on the table.
- How predictable is your sale timeline? Already under contract: any of the three. Listed but not yet in offers: HELOC or bridge. Not yet listed: HELOC for flexibility, or sell first and skip the equity loan entirely.
- How much equity do you actually need? Less than 20 percent of home value: HELOC is usually cheapest. More than 30 percent: cash-out or bridge are usually more efficient.
We model all three for you in a thirty-minute consult. You see real fees, real rates, and real monthly costs side by side, and the right one is usually obvious within the first ten minutes.
State-specific move-up guidance.
The right equity tool also depends on your state — property taxes, insurance, and market pace shift the math. Pick yours.
Bridge vs. HELOC vs. cash-out FAQs
Which one is cheapest overall?+
A HELOC is usually the cheapest if you carry a small balance for a short time, because there are no large up-front fees and you only pay interest on what you draw. A cash-out refinance is the cheapest if rates work in your favor and you plan to keep the new loan long term. A bridge loan is typically the most expensive but the cleanest if your timeline is tight and predictable.
Can I do this if my current home is not yet listed?+
Yes for HELOCs and bridge loans. You qualify based on your credit, income, and existing equity, not on whether the home is on the market. Cash-out refinances also do not require the home to be listed, but they reset your first mortgage so they are usually the wrong move when you are about to sell.
How fast can I close on each option?+
Bridge loans are typically the fastest at two to three weeks since they are designed for time-sensitive purchases. HELOCs run three to six weeks depending on the lender. Cash-out refinances run thirty to forty-five days like any standard refi. Plan timelines accordingly, especially when the next home purchase has a hard close date.
What rate should I expect on each?+
HELOCs are usually variable, often quoted as Prime plus a margin. Bridge loans are higher than standard mortgage rates, often by one to three percentage points, and may be interest-only during the bridge period. Cash-out refinance rates are tied to your blended LTV and credit, and are typically a small premium over a standard rate-and-term refi.
Will I have to pay all three at once if my sale is delayed?+
In a buy-before-sell scenario you would carry your existing first mortgage plus whichever equity tool you chose plus the new mortgage on the next home. If the sale stretches, that combined cost is real and worth modeling up front. Most missed timelines are months, not days. Plan for the realistic worst case before signing.
Is one option better for self-employed buyers?+
For self-employed borrowers we generally lean toward HELOCs or bridge loans because they preserve your existing first mortgage. Refinancing means re-qualifying with current tax returns or bank statements, which can be a longer underwriting cycle. If you have a strong existing low-rate mortgage, do not give it up unless you absolutely must.
See all three side by side.
We model real numbers — fees, rates, monthly cost, and the math against your existing mortgage. Thirty minutes and the right tool is usually obvious. No credit pull, no commitment.