Buying first can be the smoothest path to your next Scottsdale home, especially if you want to avoid a rushed sale or temporary housing. The right financing makes that possible. This guide compares two common tools to unlock equity before your sale closes: a HELOC and a bridge loan. You will see how each option works, what it costs, how it affects your offer strength, and how to choose with Scottsdale timing and carrying costs in mind.
Buying First in Scottsdale: Your Options
When you buy before you sell, you solve timing stress but take on short-term financing and carrying costs. Your goal is to free up enough cash to write a strong offer on the new home while keeping risk manageable until your current home sells. Two tools can help:
- HELOC: a revolving line of credit secured by your current home.
- Bridge loan: a short-term loan that spans the gap between purchase and sale.
Both can support a non-contingent offer, but they work differently, cost differently, and carry different risks. Your choice shapes cash flow, underwriting, and how you plan the transition.
HELOC vs Bridge Loan Basics
What a HELOC Is and Does
A home equity line of credit is a revolving credit line secured by your home. During the draw period, you can pull funds as needed and often make interest-only payments. After the draw period ends, the line converts to a repayment period where principal and interest are due. HELOCs are typically variable-rate products tied to an index plus a margin, and some lenders allow fixed-rate conversions for portions of the balance. Compared with a lump-sum second mortgage, a HELOC offers flexibility to draw only what you use according to the CFPB’s HELOC overview.
Typical use when buying first: draw funds for the new down payment and closing costs, carry the line for a short window, then pay it off when your sale closes.
What a Bridge Loan Is
A bridge loan is a short-term loan designed to cover the period between purchasing your next home and selling your current one. It is usually secured by your current home, and sometimes both properties. Terms commonly run 3 to 12 months, with interest-only payments and a balloon due at payoff when your home sells or when you refinance into permanent financing. Many lenders pair the bridge with your new mortgage for speed and logistics as summarized by Bankrate.
Key Similarities and Differences
- Access to funds
- HELOC: revolving line. Draw only what you need.
- Bridge: lump sum designed to deliver a sizable down payment fast.
- Repayment timing
- HELOC: interest-only during draw, then principal plus interest in repayment.
- Bridge: short-term, interest-only with a balloon payoff at sale or refinance.
- Collateral and lien position
- HELOC: typically a second lien on your current home.
- Bridge: secured by your current home, sometimes cross-collateralized.
- Underwriting and DTI impact
- Both are underwritten with income, credit, and combined loan-to-value (CLTV) in mind. A HELOC is often evaluated against CLTV limits, while a bridge may be structured to pay off the first mortgage to improve ratios.
Costs, Risks, and Qualifying Differences
Payments, Rates, and Fee Structures
- HELOC
- Variable rate tied to an index plus margin; many products allow interest-only payments during the draw period.
- Costs include appraisal, title, and possible annual or inactivity fees. National surveys in 2025 placed average HELOC rates in the high single digits, though individual offers vary by lender and borrower profile per Bankrate’s market coverage.
- Bridge loan
- Short-term and typically more expensive than HELOCs. Rates often run higher, plus origination and closing costs, and sometimes exit fees per LendingTree’s overview.
Cash-flow lens: a HELOC can keep payments lower during a short overlap because you draw only what you need and often pay interest-only. A bridge concentrates more cost into a brief window but delivers a large lump sum quickly.
Lien Position and Equity Requirements
- HELOCs are often capped by combined loan-to-value. Many lenders keep CLTV near 80 to 85 percent for approval, subject to credit, income, and property type as a general rule of thumb reflected in lender guidance.
- Bridge loans rely on current equity and marketability. Some structures pay off your first mortgage and provide additional cash, but at a higher effective cost.
Risk if values shift: with either product, a price drop while you carry two homes can compress equity and limit refinance options. Build a conservative buffer.
Underwriting, Docs, and Timing
- HELOC: full documentation is common, including income, credit, appraisal, title, and insurance. Many lenders can move from application to close in a few weeks when files are clean. Expect variable-rate disclosures and possible line caps or freezes in certain market conditions see consumer guidance on HELOC mechanics.
- Bridge: designed for speed. Some lenders close in 1 to 2 weeks, especially when they also originate the purchase mortgage. You will need clear title, valuation, and income verification. Get a written term sheet that spells out rate, fees, maturity, and payoff mechanics CNB’s overview of HELOC timelines and documentation provides a useful reference point for expectations.
Tax note: interest on home equity borrowing is generally deductible only when proceeds are used to buy, build, or substantially improve the property that secures the loan under current federal rules through 2025. Confirm your use case with a tax professional see the CFPB’s summary of HELOC usage and tax-industry clarifications like this legal summary.
Local carrying costs: factor Maricopa County property taxes, which are based on Arizona’s limited property value system and can be influenced by local primary and secondary tax rates and voter-approved measures. That impacts how long you can comfortably carry both homes per the Arizona Department of Revenue.
Offer Strength and Timeline Planning
Competing With Non-contingent Offers
- HELOC: gives you immediate liquidity for a down payment so you can avoid a home-sale contingency. This can make your offer cleaner while maintaining flexibility to draw only what you need.
- Bridge: can deliver a larger lump sum to make a stronger down payment or cover the entire non-contingent purchase, which can be valuable in multiple-offer situations.
Either way, pair your financing with proof of funds and a clear closing plan. Track the mortgage-rate backdrop as you plan your exit strategy see Freddie Mac’s weekly rate context.
Managing Two Mortgages and Cash Flow
- List every carrying cost: existing mortgage, new mortgage or interest-only payments, property taxes, HOA, utilities, insurance, and staging costs.
- Model best case, base case, and slow-sale scenarios so you know your cash runway for 1 to 3 months, 3 to 6 months, and 6 to 12 months.
- With a HELOC, consider a smaller initial draw to limit interest and keep reserves for surprises. With a bridge, plan for the balloon payoff at sale and have a refinance or fallback strategy.
Closing Timelines, Possession, and Move-out
- Align close dates to minimize overlap. If the sale lags, negotiate post-possession or a short rent-back with your buyer to reduce double housing time.
- Build appraisal and underwriting timelines into your schedule. Bridge loans may close faster, but both products depend on valuation and clear title.
- If you expect a gap between closings, price in storage or movers twice. Sometimes the higher cost of a bridge is offset by fewer moves.
Alternatives to HELOC or Bridge
Recast Your New Mortgage After Sale
Some lenders allow a one-time recast. You close with a smaller down payment, then apply sale proceeds to principal later and reset the monthly payment. Policies and fees vary by lender. Confirm recast eligibility before you rely on it.
Piggyback Second or 80-10-10
A second mortgage at purchase can reduce the main loan-to-value and monthly mortgage insurance. After your sale, you can pay off the second. Compare closing costs and rates against a HELOC or bridge.
Sale-leaseback and Post-closing Occupancy
If a buyer is flexible, a short rent-back can give you time to find and close on the next home without interim financing. Structure it carefully with your agent and escrow.
Securities-backed or Buy-before-you-sell Programs
If you have a sizable investment portfolio, a securities-backed line can provide low-friction liquidity without touching home equity. There are also third-party programs that front the purchase or guarantee the sale. Compare costs, covenants, and timelines to traditional options.
Choose the Right Path for You
Match Options to Common Scenarios
- High equity, modest cash need, confident your home will sell in 30 to 60 days
- Likely fit: HELOC. Draw what you need for the down payment and keep interest-only payments brief.
- Need a large, fast lump sum for a non-contingent offer in a competitive segment
- Likely fit: Bridge loan. Accept higher short-term cost to win the offer and repay at sale.
- Jumbo purchase with complex income or a unique property
- Either tool may work. Underwriting favors clear documentation and conservative CLTV. Get written terms early and build extra time.
- Rate-sensitive and want predictable payments
- Consider a smaller HELOC draw, fixed-rate conversion options, or alternatives such as a piggyback second, depending on lender offerings.
Decision Factors and Simple Framework
- Offer strength: how competitive do you need to be, and how large a down payment is necessary in your target neighborhood?
- Cash flow: how many months can you carry both homes if the sale takes longer than expected?
- Certainty: do you prefer a single short-term payoff at sale, or the flexibility to draw only what you need?
- Complexity: which option integrates cleanly with your new mortgage, appraisal timelines, and possession logistics?
Questions to Ask Lenders and Agents
- For HELOCs
- What is the margin over index, are there rate caps, floors, or conversion options, and can the lender freeze the line?
- What CLTV will you use, and what is the estimated closing timeline?
- What are the draw period, repayment period, fees, and payment examples at today’s rate environment reference HELOC mechanics?
- For bridge loans
- What is the rate, origination, closing costs, and any exit or prepayment fees see typical structures?
- Will the bridge pay off my first mortgage, and how is the balloon payoff handled if my sale is delayed general risks discussed here?
- Can you coordinate the bridge and purchase mortgage to close on the same day?
- For tax and carrying costs
- If I use a HELOC, will my intended use qualify for interest deductibility under current rules see CFPB summary?
- How will Maricopa County property taxes, HOA dues, and insurance affect my 3 to 6 month cash plan Arizona property tax basics?
Next Steps to Move Up Smoothly
- Get real comps and an estimated time-to-sale for your neighborhood and price point so you can model overlap scenarios.
- Request written term sheets for a HELOC, a bridge loan, and your purchase mortgage so you can compare total costs side by side.
- Build a simple cash-flow plan for 1, 3, and 6 months of overlap. Add a buffer for repairs, staging, and rate movement.
- Track mortgage-rate trends so you can time your refinance or payoff window effectively Freddie Mac’s weekly data helps set context.
When you are ready, we can pressure-test your plan against Scottsdale’s current listing times, price bands, and neighborhood dynamics. For an equity starting point, Get your instant home valuation and schedule a consult. We will help you choose the financing path that fits your risk tolerance and timeline, then structure your offer and closing plan so the move feels calm and deliberate. Start the conversation with Chris Ringhofer.
FAQs
Is a HELOC or a bridge loan cheaper for buying before I sell?
- It depends on how much you need and how long you will carry it. HELOCs often start with lower interest and interest-only payments during the draw. Bridge loans are designed for speed and larger lump sums but usually cost more in rate and fees see Bankrate overview and HELOC rate context.
How much equity do I need for a HELOC?
- Many lenders cap combined loan-to-value near 80 to 85 percent, subject to credit and income. Ask each lender for their CLTV limit and pricing typical requirements summarized here.
Can I deduct the interest?
- Generally only if proceeds are used to buy, build, or substantially improve the home that secures the loan under current rules through 2025. Confirm your situation with a tax advisor policy context via CFPB and legal summary.
Which option makes my offer stronger in Scottsdale?
- Both can remove a home-sale contingency. A bridge often provides a larger, faster lump sum, which can strengthen a non-contingent offer. A HELOC can work well if you only need a portion of your equity and expect a quick sale.
What if my current home takes longer to sell?
- With a HELOC, your payment may be manageable if you drew conservatively, but variable rates can change. With a bridge, you face a balloon payoff and may need to refinance. Model 3 to 6 month scenarios and keep a buffer lender-education resources outline these risks.
How do Arizona property taxes affect my overlap plan?
- Maricopa County taxes are based on Arizona’s limited property value system, and local primary and secondary tax rates can change carrying costs. Include taxes, HOA, and insurance in your overlap budget Arizona Department of Revenue FAQ.
How volatile are mortgage rates right now?
- Rates move week to week and affect refinance and carrying-cost plans. Check weekly trends as you plan timing and exit strategies Freddie Mac’s weekly survey.
