Timing your next Silicon Valley home purchase before your current home sells can feel like a high-wire act. You want to write a winning offer without risking your cash flow or getting stuck with two mortgages longer than planned. The right short-term financing can bridge that gap and protect your negotiating position. In this guide, you’ll learn how bridge loans and HELOCs work, how they affect underwriting and offers in Los Altos and surrounding markets, and how to choose the option that fits your timeline and risk tolerance. Let’s dive in.
Bridge loan basics
A bridge loan is short-term financing that lets you tap your existing home’s equity to buy your next home before your current property closes. It is usually secured by your current home and repaid when that home sells or when you refinance into a permanent mortgage.
Key points to know:
- Typical term runs 3 to 12 months.
- Payments may be interest-only or deferred until your home sells, depending on the lender.
- Costs and interest rates are higher than a standard first mortgage, and origination or broker fees are common.
- Not all retail banks offer bridge loans. Specialty lenders and mortgage brokers often handle them.
HELOC basics
A Home Equity Line of Credit (HELOC) is a revolving line secured by your current home’s equity. You draw what you need, when you need it, up to a set limit, and pay interest only on the amount you use.
Key points to know:
- HELOCs have a draw period, commonly 5 to 10 years, followed by a repayment period.
- Rates are usually variable and tied to an index plus a margin. Some lenders offer fixed-rate conversions on a portion of the balance.
- Upfront fees are often lower than a bridge loan, though you may see appraisal, origination, annual, or early termination fees.
- HELOCs are widely available from banks and credit unions.
Impact on your offer
Bridge loans can enable a non-contingent offer. In competitive Los Altos, Santa Clara County, and northern San Mateo County segments, removing the home-sale contingency can strengthen your position when multiple buyers are bidding.
A HELOC can give you flexibility with lower initial costs. If inventory is improving and sellers are more open to contingencies, a HELOC may cover your down payment once you sell, or it can serve as backup liquidity if your sale and purchase overlap.
Bottom line: Match your financing to market conditions. When homes are moving fast and multiple offers are common, a bridge loan can help you act decisively. When the market allows more negotiation room, a HELOC may be the more conservative route.
Qualifying and cash flow
Debt-to-income and reserves
Underwriters count payments on outstanding bridge loans or HELOCs when calculating your debt-to-income ratio unless specific program rules allow otherwise. In high-cost Silicon Valley markets, many lenders require extra reserves, sometimes covering both properties for several months. Make sure your pre-approval explicitly models the bridge or HELOC structure you intend to use.
Loan-to-value and jumbo
HELOCs typically follow combined loan-to-value limits, often landing around 80 to 90 percent, depending on your credit and property type. Bridge loan LTV limits vary by lender. Because many purchases in Los Altos and adjacent markets exceed conforming loan limits, you may need a jumbo mortgage on the new home. That can increase reserve requirements and make the treatment of your bridge or HELOC more important to qualification.
Carrying costs while you transition
For a period, you may carry payments on two properties. Interest-only bridge loans can reduce monthly outflow, but total interest accrues quickly. HELOC payments can be lower initially, but they are typically variable. Plan for a conservative timeline in case your current home takes longer to sell than expected.
Costs, rates, and tax notes
Typical cost elements
- Bridge loan: Expect an origination or placement fee that is often 1 to 3 percent of the loan amount, plus appraisal, title, and closing costs. Interest rates are higher than standard mortgages. Some lenders charge an exit fee for early payoff.
- HELOC: Appraisal and application fees may apply, along with possible annual or early termination fees. Upfront costs are often lower than a bridge, and you pay interest only on funds you draw.
Rate behavior to plan for
- Bridge loans are commonly fixed or short-term variable and priced above first-mortgage rates.
- HELOCs are typically variable. Some lenders let you convert portions to a fixed rate. Consider the risk that payments can rise if market rates increase.
Tax treatment
Interest deductibility depends on IRS rules and how you use the funds. Post-2017 changes limit some deductions for home equity interest unless funds are used to buy, build, or substantially improve the home that secures the loan. Always confirm with a tax professional how these rules apply to your situation.
Local market factors to weigh
Price points and jumbo financing
In Los Altos, much of Santa Clara County, and northern San Mateo County, prices often require jumbo loans or high down payments. That means you may need larger short-term financing amounts to move quickly on a target property.
Inventory and competitiveness
Tight inventory and multiple-offer situations make non-contingent offers more attractive to sellers. A bridge loan can help you write stronger terms. When inventory improves and days on market stretch, sellers may be more open to contingencies, which can make a HELOC strategy more appealing.
Sales timing and volatility
Markets here can move quickly, then cool. If you expect your current home to sell in a short window, a bridge loan can be reasonable. If timing feels uncertain or extended, a HELOC or a more conservative approach may reduce risk.
Local lender familiarity
Some regional banks, credit unions, and brokers specialize in Bay Area bridge financing, while HELOCs are widely available. Work with providers who understand local values and common lien structures so timelines and qualification align with your plan.
Which option fits your situation
Scenario A: You need a non-contingent, competitive offer
- Consider a bridge loan.
- Why: You can fund your down payment or close without waiting for your sale, helping you compete on terms.
- Trade-offs: Higher fees and rates, potential to carry two mortgages if your sale is delayed, and close coordination with your permanent mortgage lender is essential.
Scenario B: You want flexibility and expect to sell soon
- Consider a HELOC or a smaller bridge.
- Why: HELOCs are often lower cost and let you draw only what you need. This can support a contingent offer in markets where sellers will allow it.
- Trade-offs: Some sellers prefer non-contingent offers, and HELOC rates are usually variable.
Scenario C: You have strong cash reserves
- Consider cash, a 401(k) loan, or contract alternatives like rent-back or escrow holdbacks.
- Why: You may avoid short-term borrowing costs.
- Trade-offs: Liquidity use, potential retirement-account implications, and not all parties accept holdbacks or rent-backs.
Scenario D: You have underwriting concerns
- Action: Coordinate early with your permanent loan officer to confirm how DTI, reserves, and second-lien balances are treated.
- Why: Some programs allow specific treatment for temporary financing structures. Early alignment prevents last-minute surprises.
Your step-by-step plan
- Get a pre-approval that models your chosen structure. Ensure it shows exactly how the bridge or HELOC payments, balances, and reserves will be handled.
- Price out both options. Request itemized quotes for rate, APR, fees, appraisal, closing costs, and any exit or annual fees.
- Map a conservative timeline. Budget for 3 to 6 months longer than expected to sell your current home, and calculate the cost of carrying both properties.
- Confirm documentation and draw logistics. Ask how quickly HELOC funds can be accessed and what the bridge loan approval-to-close timeline looks like.
- Align with your tax advisor. Verify potential interest deductibility and any tax implications specific to your plan.
- Set your contract strategy. With your agent, decide on contingency language, rent-back options, or escrow holdbacks based on current local norms.
- Keep a Plan B. Identify steps you will take if your home takes longer to sell, such as pricing adjustments or temporary rental arrangements.
Risks and how to manage them
- Sale delay beyond bridge term
- Mitigation: Negotiate a possible extension, avoid full reliance on bridge proceeds, and keep a backup plan.
- HELOC rate increases
- Mitigation: Size the line conservatively, consider a partial fixed-rate conversion if available, and test higher-payment scenarios.
- Underwriting changes or lender treatment of temporary debt
- Mitigation: Get lender sign-off in writing during pre-approval and ensure your bridge and permanent lenders coordinate.
- Upfront costs reducing net proceeds
- Mitigation: Compare total costs across products, shop multiple providers, and run net proceeds scenarios with realistic sale prices.
Move with confidence
The right short-term financing can help you secure a home you love without unnecessary stress. Success comes from early planning, realistic timelines, and a clear understanding of how each option affects your offer, qualification, and cash flow. If you want a seasoned, local advisor to help you structure a winning path from list to close, connect with The Grail Group for discreet, high-touch guidance backed by deep Silicon Valley experience.
Ready to explore your options and timing? Contact The Grail Group to get an instant property valuation and private consultation.
FAQs
What is the main difference between a bridge loan and a HELOC for move-up buyers?
- A bridge loan is short-term financing to buy before you sell, usually repaid when your current home closes, while a HELOC is a revolving line on your current equity that you draw as needed.
How do bridge loans or HELOCs affect mortgage approval for my new home?
- Lenders often count payments on these debts in your DTI and may require extra reserves, so get pre-approval that models your exact structure.
When does a non-contingent offer make sense in Silicon Valley?
- In tighter, competitive segments where multiple offers are common, a non-contingent offer supported by a bridge loan can strengthen your terms.
What are typical costs I should plan for with each option?
- Bridge loans often include a 1 to 3 percent origination fee plus higher interest and closing costs; HELOCs usually have lower upfront fees but variable rates.
How should I plan for rate risk with a HELOC?
- Size the line conservatively, consider fixed-rate conversion if available, and model higher-rate payment scenarios before you draw.
