Also check the payment the replacement mortgage lender will count. A structure that provides enough cash may still create an unacceptable debt or reserve position. The calculator's ratio is an illustration until the lender accepts the actual treatment. [1]
Start with available equity
Enter the current home's supported value, first mortgage balance and all other secured debt. Add each proposed lender's combined loan to value ceiling or, preferably, the actual approved credit amount.
Estimated equity capacity is different from approval and different again from spendable cash. Fees withheld, required payoffs or a lower appraisal can reduce what arrives in your account. Fannie Mae's bridge guidance also addresses how borrowed equity can be used in an eligible transaction. [2]
Enter the same required net funds for both options. If one cannot provide that amount, display the shortfall rather than quietly comparing a smaller loan with a larger one.
Put the terms on one calendar
For a HELOC, enter the amount actually drawn, rate, fees, payment method, draw and repayment dates and any early closure charge. HELOCs commonly have variable rates and a separate repayment period, so ask what happens when the rate or required payment changes. [3]
For a bridge, enter the real structure. Some transactions add a lien; others replace existing debt or use different collateral. Record the advance, payoffs, payment, interest accrual, maturity and extension terms rather than assume all bridge loans work alike.
Choose a sale date and stress it later. Do not assume the line or bridge can be extended if the house remains unsold. The contract and lender control that decision.
How the cost comparison works
The basic interest only view multiplies outstanding drawn principal by the entered annual rate and time, then adds nonrefundable fees and other agreed charges. Principal repaid at sale is shown separately because it returns borrowed money rather than representing an interest expense.
The tool also shows the actual monthly cash payment and the replacement lender's entered qualifying payment. Deferred interest may reduce current cash outlay while increasing the payoff. That distinction should remain visible.
Use the HELOC requirements guide for the broader equity review and the buy before selling guide for transaction sequencing.
A hypothetical six month comparison
Assume a $500,000 home, $280,000 existing mortgage and a hypothetical 80% combined borrowing ceiling. Estimated additional capacity is $120,000 before fees and other restrictions. This is an assumption, not a lender offer.
Suppose both options provide an $80,000 draw, fees are paid separately in cash, balances remain constant and six equal monthly interest periods are used.
| Measure | ** HELOC example** | ** Bridge example** |
|---|---|---|
| Assumed annual rate | 8.5% | 10.5% |
| Monthly interest only payment | $566.67 | $700.00 |
| Cash upfront fees | $1,000 | $3,000 |
| Six month interest plus fees | $4,400 | $7,200 |
A further three months adds $1,700 or $2,100 of interest under the same assumptions. Actual daily accrual, changing rates, amortization, minimum interest or extension fees would change these results.
If other qualifying obligations, including both homes, total $6,500 and gross monthly income is $14,000, adding these assumed interest only payments produces approximately 50.5% or 51.4%. The lender may require a different payment calculation; neither ratio is an approval result.
Decide what happens after sale
The old mortgage and equity debt must be reflected in the seller net calculation. Only the remaining sale cash is available for reserves or the new mortgage.
A principal paydown on the replacement loan does not automatically reduce its required payment. Use the recast calculator if the servicer confirms eligibility, or compare selling first through the calculator hub.
Send Dane both term sheets, the net cash requirement and the delayed sale result. Review available funds, monthly obligations and maturity together before using the lower cost illustration as the reason to choose a loan.
This calculator gives an estimate only. It is not a loan offer or approval.