You need $100,000 from your home equity within 3 weeks. Your closing date is approaching, a critical business opportunity won't wait, or an unexpected expense demands immediate action. You have two primary options: a bridge loan or a Home Equity Line of Credit (HELOC). Both tap into your property equity, but they serve different purposes, have different timelines, and come with vastly different cost structures.
Traditional banks typically recommend HELOCs as the default equity access solution—lower interest rates, revolving credit, no set repayment timeline. But when timing matters, when you don't qualify for traditional lending, or when you need certainty of approval, a bridge loan often becomes the practical choice despite higher costs.
This guide compares bridge loans and HELOCs across eight critical factors: approval timeline, qualification requirements, cost structure, loan amounts, repayment terms, use cases, and when each option makes strategic sense. By the end, you'll understand which solution fits your specific situation—and why the "cheaper" option isn't always the right one when time and certainty matter.
Quick Comparison: Bridge Loan vs. HELOC
| Factor | Bridge Loan (Private) | HELOC (Bank) |
|---|---|---|
| Approval Timeline | 1-3 weeks | 4-8 weeks |
| Interest Rate | 7.99%-14.99% | Prime + 0.5%-1% (currently ~7.5%-8%) |
| Upfront Fees | 1-3% lender fee + legal/appraisal | $0-$500 setup fee |
| Term Length | 6-12 months (short-term) | Revolving (no fixed term) |
| Qualification | Equity-based (minimal income verification) | Strict income + credit requirements |
| Best For | Time-sensitive deals, complex income | Ongoing access, lower ongoing costs |
What Is a Bridge Loan?
A bridge loan is a short-term mortgage (typically 6-12 months) that provides temporary financing until a more permanent solution becomes available. The name reflects its purpose: "bridging" the gap between an immediate need and a future event—closing on a new home, refinancing to a traditional bank, selling a property, or resolving an income documentation gap.
In Ontario, private bridge loans are typically offered by private lenders and mortgage investment corporations (MICs) rather than traditional banks. They focus primarily on property equity rather than borrower income or credit score, which enables faster approvals and more flexible qualification.
How Bridge Loans Work
- Loan-to-Value (LTV): Up to 75-80% of property value (including existing mortgages)
- Interest: Charged monthly, often interest-only payments
- Fees: Lender fee (1-3% of loan amount), appraisal fee ($300-$500), legal fees ($800-$1,500)
- Term: 6-12 months, with possibility to renew if exit strategy delayed
- Approval Focus: Property equity, exit strategy, payment ability
Common Bridge Loan Scenarios
- Property Purchase Bridge: Buying new home before selling current one (need down payment funds)
- Renovation Bridge: Funding renovations to increase property value before traditional refinancing
- Business Opportunity: Accessing equity quickly for time-sensitive investment
- Separation/Divorce: One spouse buying out the other's equity share
- Income Recovery Bridge: Temporary financing while rebuilding income documentation after business changes
- Power of Sale Stoppage: Emergency financing to halt foreclosure proceedings
What Is a HELOC (Home Equity Line of Credit)?
A HELOC is a revolving line of credit secured by your home equity, similar to a credit card but with much lower interest rates because your property serves as collateral. Traditional banks offer HELOCs as part of their standard mortgage products, with qualification requirements similar to conventional mortgages.
HELOCs provide ongoing access to funds up to a pre-approved limit. You can borrow, repay, and re-borrow as needed without reapplying, paying interest only on the outstanding balance. This flexibility makes HELOCs ideal for long-term financial planning, ongoing expenses, or situations where you may need multiple withdrawals over time.
How HELOCs Work
- Credit Limit: Up to 65% of property value (minus existing mortgages)
- Interest Rate: Variable, typically Prime + 0.5%-1% (currently ~7.5%-8% in Ontario)
- Fees: Minimal ($0-$500 setup fee, annual fee sometimes applies)
- Draw Period: Ongoing access, no fixed term (can remain open indefinitely)
- Payments: Interest-only minimum, can pay down principal anytime without penalty
- Approval Focus: Income verification, credit score (typically 680+), debt service ratios
Common HELOC Use Cases
- Ongoing Renovations: Draw funds as renovation phases complete
- Investment Capital: Access equity for stock market, business, or additional property investments
- Emergency Fund: Safety net for unexpected expenses (medical, job loss, major repairs)
- Debt Consolidation: Pay off higher-interest credit cards or loans
- Education Costs: Tuition, living expenses for children's post-secondary education
- Lifestyle Expenses: Weddings, travel, major purchases
Bridge Loan vs. HELOC: 8 Critical Factors
1. Approval Timeline: Speed vs. Process
Bridge Loan: 1-3 weeks from application to funding
- Streamlined underwriting focused on property value and equity
- Appraisal ordered within 48 hours, typically completed within 1 week
- Minimal income verification (bank statements, business overview)
- Faster legal process (single-purpose loan, clear exit strategy)
HELOC: 4-8 weeks from application to approval
- Full bank underwriting (income verification, employment confirmation, credit check)
- Requires 2 years tax returns, pay stubs, employment letters
- Self-employed borrowers face additional scrutiny (business financials, CRA records)
- Debt service ratio calculations (GDS/TDS must meet bank guidelines)
- Appraisal + legal process + bank internal approvals add weeks
Winner for Speed: Bridge Loan. If you need funds in under 30 days, a HELOC timeline won't work. Banks cannot compress their underwriting process without compromising their risk assessment standards.
2. Qualification Requirements: Equity vs. Income
Bridge Loan Qualification (Private Lender)
- Sufficient equity (typically 20-25% minimum after new loan)
- Clear exit strategy (how will you repay or refinance?)
- Basic ability to service interest payments during term
- Property in reasonable condition (marketable if default occurs)
- Credit score considered but not primary factor (500+ often acceptable)
HELOC Qualification (Bank)
- Credit Score: Minimum 680, preferably 700+
- Income Verification: 2 years tax returns (T1 Generals + NOAs)
- Employment: Stable employment history (2+ years same employer or industry)
- Debt Service Ratios: GDS under 39%, TDS under 44%
- Equity: Combined mortgage + HELOC cannot exceed 80% LTV
- Self-Employed: Additional requirements (2 years business financials, business bank statements)
Winner for Accessibility: Bridge Loan. If you have equity but challenged credit, complex income (self-employed with write-offs), recent job change, or income rebuilding phase, bridge loans offer viable access while HELOCs remain out of reach.
3. Interest Rates: Short-Term Cost vs. Long-Term Efficiency
Bridge Loan Rates (Private): 7.99%-14.99% annually
- Rates reflect risk (less documentation, faster approval, shorter timeline)
- Higher equity position (lower LTV) = lower rate
- Stronger exit strategy = better pricing
- Fixed for term (no rate fluctuation)
HELOC Rates (Bank): Prime + 0.5%-1% (currently ~7.5%-8%)
- Variable rate tied to Bank of Canada prime rate
- Rate can increase or decrease during draw period
- Significantly lower than bridge loans on ongoing basis
- Better credit score may secure lower spread (Prime + 0.5% vs. Prime + 1%)
Cost Comparison Example: $100,000 Over Different Timelines
Scenario: $100,000 borrowed against home equity
6-Month Timeline (Bridge Financing for Property Purchase)
- Bridge Loan (10% rate): $5,000 interest + $2,000 lender fee + $1,200 legal/appraisal = $8,200 total cost
- HELOC (8% rate): $4,000 interest + $500 setup fee = $4,500 total cost
- Difference: Bridge costs $3,700 more over 6 months
24-Month Timeline (Ongoing Access)
- Bridge Loan (10% rate): $20,000 interest + $2,000 lender fee + $1,200 legal/appraisal = $23,200 total cost
- HELOC (8% rate): $16,000 interest + $500 setup = $16,500 total cost
- Difference: Bridge costs $6,700 more over 24 months
Key Insight: Bridge loans become increasingly expensive the longer you carry them. If you need funds for more than 12 months and qualify for a HELOC, the lower ongoing rate saves thousands. But if you can't qualify for a HELOC, or need funds within 3 weeks, the bridge loan higher cost is the price of accessibility and speed.
4. Upfront Fees: Immediate Cost vs. Minimal Setup
Bridge Loan Fees (Private):
- Lender Fee: 1-3% of loan amount (e.g., $2,000-$3,000 on $100K loan)
- Appraisal: $300-$500
- Legal Fees: $800-$1,500 (private mortgage registration)
- Broker Fee: Sometimes included (0-2% if separate)
- Total Upfront: $3,100-$5,500 on $100,000 loan
HELOC Fees (Bank):
- Setup Fee: $0-$500 (often waived as promotion)
- Appraisal: Sometimes required ($300-$400), often waived
- Legal: Bank covers legal costs in many cases
- Annual Fee: $0-$100 (varies by institution)
- Total Upfront: $0-$500 typically
Winner for Low Fees: HELOC. Banks absorb most setup costs to attract customers for long-term credit relationships. Private lenders charge fees reflecting the service provided (fast approval, flexible qualification, short-term lending risk).
5. Loan Amount Limits: Maximum Access
Bridge Loan (Private): Up to 75-80% LTV (including existing mortgages)
- Can access more equity than HELOC in many cases
- Example: $500K home with $300K mortgage = $100K-$125K available (75-80% LTV)
- Some lenders go to 85% LTV for strong exit strategies
- First or second mortgage positioning available
HELOC (Bank): Up to 65% LTV (minus existing mortgages)
- Combined mortgage + HELOC cannot exceed 80% LTV total
- Example: $500K home with $300K mortgage = $25K available HELOC (65% LTV rule)
- If existing mortgage is only 50% LTV, HELOC can go up to 15% additional (65% combined)
- Regulatory cap protects borrowers from over-leveraging
Winner for Maximum Access: Bridge Loan. If you need to access the maximum possible equity from your property, private bridge loans allow higher LTV ratios. However, higher leverage = higher risk, so ensure you have a solid exit strategy.
6. Repayment Terms: Structured Exit vs. Flexible Draw
Bridge Loan Repayment:
- Term: 6-12 months (sometimes up to 24 months)
- Payments: Interest-only monthly payments during term
- Maturity: Principal + any remaining interest due at end of term
- Prepayment: Usually allowed without penalty (designed for early exit)
- Renewal: Possible if exit delayed, but lender reassesses situation
HELOC Repayment:
- Draw Period: Ongoing, no fixed end date
- Minimum Payment: Interest-only on outstanding balance
- Principal Repayment: Optional, can pay down anytime without penalty
- Re-borrowing: Can re-borrow up to limit as you pay down principal
- Flexibility: Draw $20K, repay $10K, re-draw $30K—total flexibility
Winner for Flexibility: HELOC. Revolving credit structure provides maximum flexibility for unpredictable needs. Bridge loans work best when you have a clear timeline and exit strategy (property sale, refinancing, business proceeds).
7. Use Case Suitability: When to Choose Which Option
Choose Bridge Loan When:
- You need funds within 3 weeks
- You don't qualify for bank lending (complex income, recent credit issues)
- You have a clear exit strategy (property sale, refinancing within 12 months)
- You're buying property before selling current home
- You're in separation/divorce and need buyout funds
- You're facing power of sale and need emergency stopgap
- You need to access more than 65% LTV
Choose HELOC When:
- You qualify for traditional bank lending
- You need ongoing access to funds (not one-time withdrawal)
- Timeline allows 6-8 weeks for approval
- You want lowest possible interest rate
- You need emergency fund backup for future unknown expenses
- You're planning multi-year renovation project
- You want to minimize upfront costs
8. Risk Considerations: What Can Go Wrong?
Bridge Loan Risks:
- Exit Strategy Fails: Property doesn't sell, refinancing approval delayed, business proceeds don't materialize
- Renewal Uncertainty: If you can't exit on time, lender may not renew (or only renew at higher rate)
- High Short-Term Cost: If timeline extends beyond 12 months, total cost becomes expensive
- Payment Pressure: Interest-only payments still due monthly; failure to pay = default risk
HELOC Risks:
- Variable Rate Risk: Prime rate increases = your monthly payment increases
- Over-Borrowing Temptation: Easy access can lead to unnecessary debt accumulation
- Bank Recall: Banks can reduce or recall HELOCs if property value declines or income changes
- Qualification Changes: If income drops or employment ends, bank may freeze further draws
- Revolving Debt Trap: Interest-only payments mean principal never decreases unless intentional paydown occurs
Both options leverage your home as security. If you default on either, you risk losing your property. The key is matching the financing tool to your specific situation, timeline, and ability to execute your repayment or exit strategy.
Real-World Decision Scenarios
Scenario 1: Buying New Home Before Selling Current One
Situation: You found your dream home and the closing is in 4 weeks. You need $150,000 for the down payment, but your current home won't sell for another 2-3 months.
Right Choice: Bridge Loan
Why: Timeline doesn't allow HELOC approval (4-8 weeks). Clear exit strategy (current home sale in 2-3 months). One-time need, not ongoing access. Despite higher costs ($3,000-$4,000 in fees + higher interest), you secure the property purchase and repay from home sale proceeds.
Scenario 2: Multi-Year Home Renovation
Situation: You're planning a $200,000 renovation over 18 months (kitchen, bathrooms, basement). You'll draw funds as each phase completes. You have stable employment and good credit.
Right Choice: HELOC
Why: Multiple draws over extended period (bridge loans are single-draw, short-term). Lower ongoing interest rate saves thousands over 18 months. You qualify for bank lending. No rush (can wait 6-8 weeks for approval). Flexibility to draw only what's needed when needed.
Scenario 3: Self-Employed with Tax Write-Offs, Emergency Business Need
Situation: You run a successful business earning $180,000 annually, but your NOA shows $52,000 due to legitimate write-offs. You need $80,000 within 2 weeks for an equipment purchase opportunity.
Right Choice: Bridge Loan
Why: HELOC qualification impossible (banks use NOA income = $52,000, insufficient for $80K credit line). Timeline is urgent (2 weeks). Clear business revenue demonstrates ability to service interest payments. Bridge lender uses alternative income verification (bank statements showing $180K revenue). Equipment purchase generates return to facilitate exit/refinancing.
Scenario 4: Emergency Fund for Financial Security
Situation: You want access to $100,000 equity as backup for potential job loss, medical expenses, or unexpected family needs. You don't need the money now but want it available.
Right Choice: HELOC
Why: Bridge loans charge interest immediately on full amount. HELOC charges interest only when you draw funds. No urgency (can wait for bank approval). Ongoing access means you can draw $20K, repay it, then draw again if another emergency occurs. Lower rate minimizes cost if you do need to use it.
Can You Have Both? Combining Strategies
In some cases, borrowers use both tools sequentially:
- Bridge Loan First (Emergency/Speed Phase): Use bridge loan to handle immediate need (property purchase, business opportunity, separation buyout) when HELOC timeline won't work or you don't currently qualify.
- HELOC Second (Long-Term Efficiency Phase): After resolving the immediate situation, qualify for HELOC (improved income documentation, credit rebuilding) and use it to pay off bridge loan. This "exit strategy" moves you from high-cost short-term debt to lower-cost revolving credit.
This strategy makes sense when: (1) immediate timing requires bridge loan, (2) you have a clear path to HELOC qualification within 12 months (income rebuilding, credit repair, business documentation), and (3) you want ongoing equity access after resolving the initial need.
How to Choose: Decision Framework
Ask yourself these questions to determine which option fits your situation:
Question 1: How Quickly Do You Need the Funds?
- Under 3 weeks: Bridge Loan only option
- 3-6 weeks: Bridge Loan recommended (HELOC risky timeline)
- 6+ weeks: HELOC viable if you qualify
Question 2: Do You Qualify for Traditional Bank Lending?
- Yes (good credit 680+, stable verifiable income, low debt ratios): HELOC accessible
- No (complex income, recent credit issues, self-employed with write-offs): Bridge Loan necessary
Question 3: Is This a One-Time Need or Ongoing Access?
- One-time (property purchase, divorce buyout, business purchase): Bridge Loan works well
- Ongoing/Multiple draws (renovation project, investment capital, emergency fund): HELOC better suited
Question 4: What's Your Exit Strategy or Repayment Plan?
- Clear timeline (property selling in 3 months, refinancing in 12 months): Bridge Loan appropriate
- Uncertain timeline (may need funds for 2+ years, want flexibility): HELOC safer
- No exit plan: Reconsider borrowing entirely—both options require repayment ability
Frequently Asked Questions
Can I get a bridge loan if I already have a HELOC?
Yes, but total leveraging (mortgage + HELOC + bridge loan) cannot exceed the private lender's maximum LTV (typically 75-80%). Example: $500K home with $200K mortgage + $50K HELOC = $250K total debt. You could bridge up to $125K-$150K additional (bringing total to 75-80% LTV). The bridge loan would be in third position (behind mortgage and HELOC), which may affect pricing.
What happens if I can't repay my bridge loan at maturity?
You have several options: (1) Request renewal with the same lender (reassessment required, possibly higher rate), (2) Refinance with different private lender, (3) Extend timeline and work toward traditional refinancing, or (4) Sell the property. Communication with your lender before maturity is critical—most lenders prefer working with borrowers rather than forcing sale.
Can a bank reduce or cancel my HELOC without warning?
Yes. HELOC agreements typically include clauses allowing the bank to reduce your credit limit, freeze further draws, or demand repayment if circumstances change: property value declines significantly, you lose employment, your income drops, or you miss payments on any credit products. Banks review HELOCs periodically (annual or when triggered by credit bureau alerts). This is rare but possible, which is why HELOCs shouldn't be considered "guaranteed" emergency funds.
Which option is better for investment property purchases?
Bridge loan for time-sensitive purchases where you need down payment funds within 2-4 weeks. HELOC for ongoing investment capital where you're building a portfolio over time and need multiple draws. Many investors maintain a HELOC on their primary residence as "investment capital reserve" and use bridge loans for specific time-sensitive deals that exceed HELOC limits.
Are bridge loan interest payments tax-deductible?
Interest is tax-deductible if borrowed for income-producing purposes (business investment, rental property purchase, investment portfolio). Interest is NOT deductible if borrowed for personal use (primary residence purchase, personal expenses, non-income-generating renovations). Consult with an accountant to structure borrowing for maximum tax efficiency based on use case. HELOC interest follows the same deductibility rules.
Key Takeaways
- ▸ Bridge loans excel at speed and accessibility: 1-3 week approvals, equity-based qualification, higher LTV access—ideal when timing is critical or you don't qualify for traditional lending.
- ▸ HELOCs excel at long-term efficiency: Lower rates, minimal fees, revolving credit, ongoing flexibility—ideal when you qualify and have time for bank approval process.
- ▸ Cost difference grows with time: Bridge loan higher costs are manageable for 6-12 months but become expensive beyond that. Plan your exit strategy accordingly.
- ▸ Match the tool to your timeline: Under 3 weeks = bridge loan only option. 6+ weeks with good credit/income = HELOC saves money. Evaluate based on when you actually need funds, not ideal scenario.
- ▸ Both leverage your home: Default risk exists with either option. Have realistic repayment plan or exit strategy before borrowing. Your home is on the line.
