Bridge Loans vs. Home Equity Loans in California - Which is Right for You?

While we recommend that you talk to our team about your requirements for financing, and how you can qualify for a bridge loan or home equity loan with the least risk, this guide is a snapshot of all essential information you might need to understand where you stand. 

Please remember to talk to a bridge loan expert in California before making any final decisions. You can do that here.

 

What’s a Bridge Loan?

A bridge loan (also called a “gap loan” or “swing loan”) is a short-term financing option that “bridges” the financial gap when a homeowner wants to buy a new property before they’ve sold their current home. Its purpose is temporary — you expect to repay the loan shortly, often from the proceeds of the sale of your existing home.

Key features of a bridge loan are…

Short time frame. Bridge loans are typically structured for very short-term duration — often six months to a year, sometimes up to two or three years in special cases.

Higher cost, higher risk. Because the loan is temporary and the exit strategy depends on selling your current home (or refinancing), interest rates tend to be higher, and fees — such as origination fees, appraisal, closing costs — are often higher than standard long-term mortgages. 

Interest-only or balloon payment. Many bridge loans charge interest-only during the term, with a large “balloon” payment due at the end (when you repay the loan using sale proceeds).

Because of the cost — and the risk…if your old home doesn’t sell on time, you may end up carrying two mortgages or face potential foreclosure — bridge loans are reserved for homeowners with reasonably large existing equity and a clear exit strategy. 

 

Home Equity Loan (and HELOC) in Short

A home equity loan allows a homeowner to borrow against the equity they’ve built up in their existing home. In effect, the loan is secured by the home’s value minus the remaining mortgage balance. 

Home equity products come in a few forms. The most common of them are…

Closed-end home equity loan — a lump sum, fixed amount borrowed once.

Home Equity Line of Credit (HELOC) — an open-ended credit line secured by home equity, allowing you to borrow as needed up to a limit over a draw period. 

Common features of these two loan types…

Lower/Moderate Interest Rates. Because the loan is secured with equity and typically repaid over a longer term (5–30 years), interest rates tend to be lower than bridge loans. 

Fixed or variable repayment. Closed-end home equity loans usually have fixed rate and fixed monthly payments (principal + interest). HELOCs often have variable rates and variable payments, especially during the draw period. 

Long term. Repayment schedules extend over many years — far longer than a bridge loan — which makes them suitable for long-term financial needs. 

Flexible use of funds. Home equity can be used for many purposes: home improvements, consolidating debt, education expenses, medical costs, or even down payment on a second home.

Under the law in California, a borrower applying for a home equity loan must be clearly informed of the risks: the loan will be secured by their home, and failure to repay could result in loss of the home. 

 

Legal & Regulatory Context for Bridge Loans & HELOCs in California

In California — like the rest of the U.S. — home equity loans (or HELOCs) and bridge loans are subject to different regulatory regimes and borrower protections.

• Lending and consumer protection are overseen by the California Department of Financial Protection and Innovation (DFPI). 
• Under California law, a “consumer loan” secured by a dwelling typically covers home equity loans. But a short-term loan (bridge loan) — defined as a temporary loan with maturity of one year or less for the purpose of acquiring a dwelling — is not treated as a “consumer loan.”
• That means many of the protections that apply to standard home equity loans (like periodic statements or some restrictions) may not apply to bridge loans. 
• For home equity loans/HELOCs, California law (under the Home Equity Loan Disclosure Act) requires the creditor to provide a clear disclosure at application, warning that “this home equity loan … will be secured by your home and your failure to repay … could cause you to lose your home.” 
• Generally, home equity loans require the borrower to leave a minimum equity buffer (often 15–20%), maintain a reasonable debt-to-income ratio, and satisfy credit history and income verification. 

Because bridge loans are exempt from being classified as “consumer loans” under some statutes, certain consumer protections (e.g., some of the more stringent disclosure or “ability to repay” requirements under federal mortgage reform laws) may not apply. 

 

When to Choose a Bridge Loan vs. a Home Equity Loan in California

You should choose a bridge loan when you need fast, temporary financing to buy your next home before selling your current one, have strong equity, and a clear plan for a timely sale. Choose a home equity loan or HELOC when you’re looking for lower rates, long-term repayment stability, or funds for renovations, debt consolidation, or major expenses. Avoid a bridge loan if market conditions make your sale uncertain. And avoid a home equity loan if tapping equity would leave you over-leveraged. 

Given the structural, cost, and regulatory differences, the choice between a bridge loan and a home equity loan depends heavily on your goals, financial situation, and risk tolerance. These are common scenarios and some guidance…

 

Choose a Bridge Loan if…

1. You need to buy a new home quickly before your current home sells. Maybe you found a property you love in a competitive California market and you don’t want your purchase contingent on your sale. A bridge loan gives you that liquidity.
2. You have significant equity (many lenders expect at least 40-50% equity) in your existing property. 
3. You are confident you can sell your current home within a short period 
4. You are willing to accept higher interest rates and costs in exchange for speed and flexibility. And you understand the risk: if sale is delayed or fails, you might face two mortgage payments or even foreclosure. 

However, you should be aware that bridge loans in California are not classified as standard “consumer loans,” which may mean fewer legal protections compared with long-term mortgages or equity loans.

Choose a Home Equity Loan (or HELOC) if…

1. You want long-term financing — maybe for major home improvements, consolidating debt, paying for tuition or medical expenses, or other large costs. Home equity loans spread cost over years, with predictable (fixed) or manageable (variable) payments. 
2. You prefer lower interest rates and more stable repayment arrangements compared with a short-term, high-cost loan. 
3. You have sufficient equity (many lenders want you to keep at least 20% equity after the loan) and a reasonable debt-to-income ratio. 
4. You want regulatory protections — in California, lenders must clearly disclose the risks (loss of home if default) and the loan must comply with applicable state and federal loan-disclosure laws. 

Home equity loans or HELOCs are better suited for borrowers seeking financial stability over years — not a quick, temporary cash infusion tied to a real estate transaction.

 

Key Differences Between a Bridge Loan & Home Equity Loan in a Nutshell

Feature	Bridge Loan	Home Equity Loan (or HELOC)
Purpose	Short-term “bridge” between sale of old home and purchase of new home	Long-term financing for various needs (renovation, education, debt, large purchases)
Term	Short (12 months)	Multi-year — 5 to 30 years depending on loan type
Disbursement	Lump sum at the purchase of a new home.	Lump sum (home equity loan) or line-of-credit (HELOC)
Interest / Costs	Higher interest rate; higher fees; often interest-only or balloon payment	Generally lower rates; fixed (loan) or variable (HELOC); predictable or flexible repayment
Risk / Exit Strategy	Relies on selling existing home in a short window; potential for double payments or foreclosure if sale fails	Loss of home if payments not maintained; but long-term repayment makes this risk more manageable
Regulatory treatment in California	Not classified as a “consumer loan” — fewer of the protections that standard mortgages or home equity loans get.	Subject to state disclosure laws and federal mortgage/credit protections when applicable.

 

When (Under California Law) You Might Prefer One Over the Other

• If you need to buy fast and don’t want your offer tied to the sale of your current home, a bridge loan can make sense — but only if you have enough equity and a solid plan to sell quickly.
• If you don’t have a fast timeline, or your goal is long-term (renovations, debt consolidation, education, etc.), a home equity loan or HELOC is usually more prudent.
• From a regulatory and consumer-protection standpoint: home equity loans tend to offer more transparent disclosures and legal safeguards. In California, lenders must warn borrowers that their home is at risk if they default.
• Remember…budgeting matters. If you prefer predictable, fixed monthly payments over many years, go for a home equity loan. If you’re OK with short-term higher cost but want flexibility and speed, a bridge loan might be justified — but only with careful planning.

 

A Few Cautions!

• With a bridge loan, if your old home doesn’t sell in time, you could end up paying two mortgages — old and new — plus interest and fees. That can strain finances severely.
• Bridge loans often have less regulation than long-term mortgages in California — meaning fewer protections. Here at Golden Gate, we give you expert guidance to assess your situation correctly before applying for a loan.
• With a home equity loan or HELOC, you are putting your home itself as collateral: failure to make payments can lead to foreclosure. By law in California, lenders must disclose that risk clearly.
• Also, borrowing against home equity reduces the equity buffer — which can be risky if housing markets fall or property values decline.

Both bridge loans and home equity loans provide ways to unlock cash tied up in real estate — but they are intended for very different purposes. In California, the regulatory and legal framework treats them differently: a bridge loan is a short-term, temporary solution often exempt from typical “consumer loan” protections; a home equity loan or HELOC is a longer-term financing tool with mandated disclosures and regulatory oversight.

You would lean toward a bridge loan only when you need quick, temporary funds (for a real estate transition), and you have the equity and realistic confidence to repay it quickly — from the sale of your existing home. On the other hand, if your aim is a long-term loan for improvements, debt consolidation, or other major expenses, a home equity loan (or HELOC) is usually the safer, more stable, and better-regulated choice.