Quick comparison

  • Bridge financing: short-term, lump-sum, higher fees and interest, repaid when you sell or refinance.
  • HELOC: revolving credit, typically variable rate, lower upfront costs, flexible draws and repayments during the draw period.

(See more on bridge loans for renovations and HELOC risks and repayment strategies on FinHelp: Bridge Loans for Home Renovations: Structuring Short-Term Financing and Using HELOCs for Renovations: Risks and Repayment Strategies.)

When bridge financing usually wins

  • You need a lump sum immediately to complete a renovation before listing or moving in.
  • You have a firm, short exit plan (sale or refinance) within months to a year.
  • Carrying two mortgages or a long cash gap would derail the purchase/renovation timeline.

Why: bridge loans are designed to cover a timing gap. They close faster than many permanent loans and can be underwritten to the specific exit event (sale or refinance). Expect higher interest and origination fees; lenders price in the short-term risk. (See lender expectations and exit strategies on FinHelp: When to Use a Bridge Loan vs Line of Credit.)

When a HELOC is typically better

  • Your renovation will be staged over months or years (kitchen now, bathroom later).
  • You want lower upfront closing costs and the ability to draw only what you need.
  • You prefer interest-only payments during the draw period and plan to repay over time.

HELOCs usually carry variable rates tied to an index (often the prime rate). They can be cost-effective for rolling projects but bring rate‑reset and payment shocks when the draw period ends. For consumer-facing details on HELOCs, see the Consumer Financial Protection Bureau’s guide (CFPB).

CFPB: https://www.consumerfinance.gov/ask-cfpb/what-is-a-heloc-en-1799/
Investopedia on bridge loans: https://www.investopedia.com/terms/b/bridgeloan.asp

Cost and underwriting differences

  • Interest: bridge loans often have higher fixed or variable rates; HELOCs commonly have variable rates that may start lower but can rise.
  • Fees: bridge loans can include origination, appraisal, and exit fees; HELOCs may have low or no closing costs but possible annual or inactivity fees.
  • Collateral and CLTV: both use your home as security. Lenders limit combined loan‑to‑value (CLTV), commonly around 80–90% depending on credit and market.

Practical checklist: pick the right product

  1. Timeline — can you sell/refinance in 3–12 months? If yes, bridge is a contender.
  2. Certainty of sale — if your sale is uncertain, avoid short-term bridge debt you can’t service long-term.
  3. Renovation scope — large upfront structural work often favors bridge; incremental upgrades favor HELOC.
  4. Costs — run total finance cost scenarios (interest + fees) for expected holding period.
  5. Exit plan — confirm how you will repay the bridge loan (sale, refinance, cash reserves).
  6. Credit and CLTV — check prequalification for both products before committing.

Example scenarios

  • Scenario A — Buyer needs to renovate new home before moving in and will sell their current house in 2–4 months: bridge financing is often the faster, cleaner option.
  • Scenario B — Homeowner wants to update rooms over 2–3 years and prefers drawing funds as needed: a HELOC usually fits better.

In my practice working with homeowners and flippers, I’ve seen bridge loans resolve timing gaps where resale was highly likely — but when the sale delays, the borrower faced cash‑flow stress. HELOCs work well for phased renovations, but borrowers must plan for rate resets and repayment changes after the draw period.

Pros, cons, and red flags

  • Bridge financing: + fast access, lump sum; − higher cost, short term, can be risky if sale stalls.
  • HELOC: + flexible draws, lower initial cost; − variable rates, possible payment shock, lender can freeze draws under stress.

Red flags: no clear exit plan for bridge loans; using a HELOC without a repayment strategy; borrowing to cover speculative flips without contingency funds.

Professional tips

  • Get written lender guidance on exit conditions and timelines before taking a bridge loan.
  • For HELOCs, ask about draw period length, whether interest-only payments are allowed, and what your payment will look like when the draw period ends.
  • Compare APR-equivalent costs for the time you expect to carry the loan — not just the advertised rate.
  • Consult a tax advisor about deductibility of interest: rules changed after 2017 and depend on how you use the funds.

Short FAQ

Q: Can I combine both?
A: Yes; some homeowners use a small bridge to finish urgent work and a HELOC for ongoing projects, but stacking secured debt increases CLTV and risk.

Q: What if my sale doesn’t close in time?
A: Confirm whether the bridge lender offers extensions and build reserves to cover extra months; otherwise you may need to refinance to a longer-term product.

Sources & further reading

Professional disclaimer: This article is educational and not individualized financial advice. Discuss your situation with a lender or financial advisor before choosing financing.