Buying your next Longmont home before you sell your current one can feel like a high-wire act. You want the right house, a competitive offer, and a smooth sale with minimal overlap. You also want to control costs and risk. This guide breaks down how a bridge loan compares to a HELOC for Longmont move-up buyers so you can choose a path that fits your timeline, equity, and comfort level. Let’s dive in.
What is a bridge loan?
A bridge loan is a short-term loan designed to help you buy your next home before you sell the current one. It fills the gap between today’s purchase and tomorrow’s sale proceeds.
- Typically interest-only with repayment due when your current home sells.
- Often requires a signed listing agreement or purchase contract and clear payoff instructions.
- Fees can include origination, appraisal, title, and recording costs.
- Commonly 3 to 12 months in term, meant for a defined, short window.
Many brokerages, including Compass, market bridge financing options through partner lenders. Specific rates, fees, and eligibility vary by lender and by state. Always obtain written quotes before you decide.
What is a HELOC?
A HELOC (Home Equity Line of Credit) is a revolving credit line secured by the equity in your current home. You draw funds as needed during the draw period and pay interest on what you use.
- Usually variable-rate, often tied to the prime rate plus a margin.
- Payments in the draw period are often interest-only.
- Underwriting focuses on your credit, income, and combined loan-to-value of your current home.
- The line may stay open for years, but if you use it to buy a new place you’ll likely pay it down with sale proceeds later.
Regulations require disclosures about how the rate can change, caps, and payment adjustments. Review these carefully so you understand how your payment could move.
Bridge loan vs HELOC for Longmont buyers
Qualification and underwriting
- Bridge loan: Lenders focus on the expected sale of your current property, your existing mortgage status, and your new purchase terms. You may need proof of reserves to carry both payments. Some lenders rely on your signed listing or purchase contract.
- HELOC: Lenders underwrite your credit, debt-to-income, and combined loan-to-value on your current home. An appraisal or automated valuation is common.
Cost components to budget
- Bridge loan: Interest (often higher than a standard mortgage), origination fee, appraisal, title and recording, and potential lender legal fees. Check for any prepayment penalties.
- HELOC: Variable interest, plus possible application, appraisal, annual or inactivity fees. Many lenders waive some fees. Read the fee schedule closely.
Rate structure and interest risk
- Bridge loan: Often a short-term fixed or short-term floating rate with interest-only payments. Higher initial rate reflects the short duration and sale risk.
- HELOC: Variable-rate tied to an index. Payments can rise if rates increase. Some lines let you fix a portion for a time.
Timeline and speed to funds
- HELOC: Can be quick to open, sometimes in days to weeks if your profile is straightforward. Once open, draws are typically immediate.
- Bridge loan: Many lenders can fund in roughly 1 to 3 weeks, depending on documentation and title work. Ask about fast-track options if you need to write a non-contingent offer now.
Security and lien position
- Bridge loan: May be secured by your old home, your new home, or both, depending on the structure. Lien position affects availability of funds and payoff logistics.
- HELOC: Usually a junior lien on your current home. It reduces available equity until paid off at closing.
Payoff and exit strategy
- Bridge loan: Repaid from the sale proceeds of your current home, aligned with the expected sale timeline.
- HELOC: You choose when to repay. Many sellers pay it off at closing from sale proceeds. If your sale takes longer, you continue payments.
When each option tends to fit best
- Bridge loan may fit if you need a strong, non-contingent offer right now and you expect to sell quickly.
- HELOC may fit if you have strong equity, value flexibility, and want potentially lower interest cost at the start while accepting variable-rate risk.
Quick decision checklist
- Competitiveness: Will a non-contingent offer materially improve your chances on the home you want?
- Equity and LTV: How much usable equity do you have in your current home?
- Rate risk: Are you comfortable with a variable HELOC rate that can rise?
- Timeline: How quickly do you expect your current home to sell in Longmont?
- Carry tolerance: How many months can you comfortably carry both homes if your sale is delayed?
Real-world scenarios (hypothetical)
These examples use hypothetical numbers to illustrate how costs can compare. Your exact costs depend on lender quotes and your specific property details.
Scenario A: Competitive market, need a non-contingent offer (example only)
- Current home expected sale price: $700,000; mortgage balance: $300,000
- New purchase price: $900,000; desired down payment: $200,000
- Expected time to sell: 2 months; selling costs: 7% of sale price
- Bridge loan amount: $150,000; rate: 8% annual; term: 6 months
- Monthly carry on current home (mortgage, taxes, insurance): $2,800
- Bridge fees: $4,500 total
Calculations:
- Monthly bridge interest: 150,000 × (0.08 / 12) = $1,000
- Interest over 2 months: $2,000
- Total carrying cost while holding: (1,000 + 2,800) × 2 + 4,500 = $12,100
Interpretation: A bridge loan can power a fast, non-contingent offer, with an estimated two-month carry cost of about $12,100 in this example.
Scenario B: Stable conditions, longer timeline, HELOC flexibility (example only)
- Same equity profile as above
- HELOC amount: $150,000; initial rate: 6% variable
- HELOC fees: $500; time to sell: 6 months
Calculations at 6%:
- Monthly HELOC interest: 150,000 × (0.06 / 12) = $750
- Interest over 6 months: $4,500
- Total carrying cost: (750 + 2,800) × 6 + 500 = $21,800
Stress test at 10% variable rate:
- Monthly interest: 150,000 × (0.10 / 12) = $1,250
- Interest over 6 months: $7,500
- Total carrying cost: (1,250 + 2,800) × 6 + 500 = $24,800
Interpretation: At the initial rate, the HELOC can be cheaper for a while, but variable-rate risk and longer selling windows can raise total cost. Run both options with your numbers.
Build your Longmont buy-before-sell worksheet
Gather these inputs, then run the formulas to compare options. Keep a stress-test version with higher HELOC rates and a longer sale timeline.
- A: Current home expected sale price
- B: Current mortgage balance (principal)
- C: New purchase price
- D: Down payment planned (cash and any loan draws)
- E: Bridge or HELOC amount needed
- F: Bridge interest rate or initial HELOC rate (annual %)
- G: Bridge loan term (months)
- H: Estimated time to sell current home (months)
- I: Monthly PITI on new mortgage
- J: Monthly carrying costs on current home (mortgage, taxes, insurance, HOA)
- K: Selling costs as a percent of sale price
- L: One-time fees for bridge or HELOC
- M: Any lender-required reserves
Formulas:
- Sale proceeds estimate = A − (K% × A) − B
- Gap to close new purchase = C − D
- Monthly interest cost = E × (F / 12)
- Total interest while holding = Monthly interest × H
- Total carrying cost while holding = (Monthly interest + J) × H + L
- HELOC stress test: recalc with F + 2% and F + 4%
Tip: Add 30 to 90 days to H for a conservative plan, and check your budget with that slower-sale timeline.
Key risks and how to manage them
Market and sale timing
- Risk: Your sale takes longer than expected, increasing carry costs.
- Manage: Budget for extra months, price strategically, and keep reserves to cover mortgage, taxes, insurance, and HOA.
Interest rate movement
- HELOC: Variable rates can rise. Re-run numbers at +2% and +4%.
- Bridge: Often short-term fixed or set, with a higher initial rate but less ongoing exposure.
Lender and title logistics
- Cross-collateral or junior liens can complicate payoffs.
- Manage: Coordinate early with your title company and listing agent, and request written payoff instructions from your lender.
Tax considerations
- Deductibility depends on how funds are used and the type of debt. Rules differ for acquisition debt and home equity debt.
- Manage: Talk with a CPA about interest deductibility and principal residence sale rules for your situation.
Insurance and escrow
- Lenders may require proof of insurance and, in some cases, escrow for taxes and insurance.
- If your current home will be vacant, confirm coverage and any vacancy restrictions with your insurer.
Colorado contract timing
- Be clear on financing and contingency timelines in Colorado contracts and what you will remove, and when.
- Ask your broker how contingent offers are performing in current Longmont conditions so you can decide if bridge financing is needed to compete.
Putting it together
If you need to win a home now and you are confident your current place will sell on a short timeline, a bridge loan can give you non-contingent strength with a defined exit. If you prefer flexibility and have ample equity, a HELOC can be a lower-cost way to fund your gap, provided you are comfortable with rate changes and a longer carry window. The right answer depends on your equity, timeline, and risk tolerance.
You do not have to figure this out alone. As a Compass-affiliated team, we help clients evaluate the Compass Bridge Loan option alongside other financing paths and map out a sale and purchase timeline that fits your goals. When you are ready to talk strategy for your Longmont move-up, reach out to Kimberly Kidder for a clear, local plan.
FAQs
What is the main difference between a bridge loan and a HELOC for a Longmont move-up purchase?
- A bridge loan is a short-term loan built to be repaid from your home sale and to support a non-contingent purchase, while a HELOC is a revolving, variable-rate line secured by your current home that you can draw and repay over time.
How fast can I get funds from a bridge loan or HELOC when buying in Longmont?
- Many HELOCs can be opened in days to weeks and then you can draw immediately; bridge loans often fund in about 1 to 3 weeks depending on documentation, title work, and lender process.
Which costs should I compare when choosing between a bridge loan and a HELOC?
- Compare interest rate type and payment, origination and appraisal fees, title and recording charges, potential prepayment penalties, and your total carrying cost over your expected months to sell.
Are HELOC or bridge loan interest payments tax-deductible if I use them to buy a replacement home?
- Deductibility depends on how funds are used and debt type; consult a CPA about acquisition debt rules, home equity interest, and how your specific use will be treated.
What happens to my HELOC or bridge loan when my Longmont home sells?
- Sale proceeds typically pay off the HELOC or bridge loan at closing; coordinate payoff instructions with your lender and title company early to avoid delays.
