Question:

When relocating what is the better option - bridge loan vs home equity loan?

Answer:

Sometimes, you need to move to another place and relocating comes expensive. Homeowners often wonder how to compare a bridge loan vs home equity loan, and which one is generally better.

Comparing Bridge Mortgage Loans Vs Home Equity Loans

The answer is bridge loans are more expensive as a rule of thumb. A HELOC (home equity line of credit) or a HEL (home equity loan) might get you there way cheaper. However, you may need a mortgage for a very limited time - only until your old house is sold, which generally happens within a year.

A HELOC or HEL may not be available for such a limited time. No lender will agree on 1-year HELOC. If you take a HELOC or HEL with the purpose to use the proceeds to fund your relocation and new home, your lender should be aware of that. Your loan officer may advise you on how other people made a decision and what is recommended to do in your particular case.

Bridge home loans may carry a double digit rate, or at least 1-2% higher interest rate than a standard first mortgage. Bridge loans are interest-only loans with the loan amount being repaid within 6 or 12 months. With good credit score and history, you might get nice rates on a bridge mortgage which makes them comparable to HELOCs.

Arranging financing for your new house before your previous home is sold is quite important. If you are dependant on the sale of your house and it doesn't sell before you close on your new home, you may lose your deposit.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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