How to Buy Your Dream Home
While Selling Your Current One

Many homeowners find themselves in a situation where they want to buy a new home before their current home has sold. Two financing tools that can help with this transition are bridge loans and Home Equity Lines of Credit (HELOCs). This article provides a general educational overview of what these products are and how they work conceptually.

What Is a Bridge Loan?

A bridge loan is a short-term loan secured by a borrower’s existing home. Its purpose is to provide temporary financing that “bridges” the gap between the purchase of a new home and the sale of the current one. The loan is typically repaid when the existing home sells and the sale proceeds are received.

Bridge loans are designed for move-up buyers who have built equity in their current home and want to use that equity as a down payment on a new home — without waiting for the sale to close first. Because bridge loans are short-term instruments, they generally carry higher interest rates than conventional long-term mortgages. Specific rates, fees, and terms vary by lender and borrower profile. Contact us for information relevant to your individual situation.

What Is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by the equity in a borrower’s home. Unlike a bridge loan, which provides a lump-sum disbursement, a HELOC functions more like a credit card — you draw funds as needed up to an approved credit limit and repay them over time.

For move-up buyers, a HELOC can serve a similar purpose to a bridge loan: it allows access to existing home equity before the current home sells. One important consideration is that most lenders will freeze or close a HELOC once the property securing it goes under contract for sale. For this reason, a HELOC intended for use in a move-up transaction typically needs to be established before the home is listed. HELOCs generally carry variable interest rates, and terms vary by lender.

Using Home Equity as a Down Payment

The core concept behind both bridge loans and HELOCs in a move-up scenario is the same: a homeowner who has accumulated equity in their current property can access that equity to fund the down payment on a new home, rather than waiting for the sale to close. This can allow a buyer to make a non-contingent offer on a new home, which is often more competitive in active real estate markets.

Whether a bridge loan, HELOC, or another strategy is most appropriate depends on a number of individual factors — including the amount of equity in the current home, the borrower’s income and credit profile, the expected timeline for selling the current home, and the requirements of the new purchase. Dustin Carlson can help you evaluate your options and connect you with the right resources.