We recently completed our annual Bragg Bootcamp, a popular two-day introduction to financial planning for our clients’ college-aged children and grandchildren. This year’s class was completely full yet again! Some attend because they have a true thirst for financial planning; others, because their parents or grandparents made them. Regardless, we’re glad they are here! Evie Climer, a 2025 Bootcamp participant, fell in the latter “strongly encouraged to attend by her parents” category. Much to her chagrin, I had the pleasure of leading a Bootcamp session. The topic? Debt & Credit.
I suspect that debt and credit may not sound as exciting to these college students as our session on investing. Imagine discussing credit cards, loans, and credit reports while students are thinking, “How do we buy Crypto?” and “How do we invest in AI?. However, like the tortoise in Aesop’s fable, I persevered, and at the end, convinced our Bootcamp participants of the relevance of debt management.
Like their children and grandchildren at Bootcamp, our clients are often slow to warm to conversations about debt management. That is, until they need capital quickly! Then, just like our students, our clients often find the topic to be very compelling.
Our Bootcamp students primarily use debt to establish credit and purchase long-term assets they may not otherwise currently be able to afford, such as a car. On the other hand, clients of Bragg Financial leverage debt for the flexibility, peace of mind, cost efficiency, and even tax efficiency that it can provide. They may want to buy a new home before they have sold their current one, or to downsize into a condominium or continuing care retirement community without the stress of decluttering and moving in a short closing window. They might want to buy a second home before an unrelated expected liquidity event. Bridge loans are just the tool our clients need to facilitate the types of financial decisions that arise at more mature ages and stages of life.
Bridge Loans & Benefits
Bridge loans come in all shapes and sizes and are a general term for a variety of financing structures. These loans tend to be temporary in nature, bridging the gap between the purchase of one asset and the sale of another—hence, the term “bridge loan.”
Flexibility
From fast loan underwriting and approval to liberal repayment terms, bridge loans are typically more flexible than traditional loans, such as mortgages. Most bridge loans allow clients to borrow what they need, whenever they need it. This stands in contrast to traditional amortizing installment loans like mortgages, where once you pay down principal, you can no longer “go back to the well” for more loan proceeds—you must apply for a new loan if you need more money. Bridge loans are typically revolving credit lines, meaning that clients can borrow, repay the amount advanced in full, then borrow again from the same loan facility with no additional bank underwriting or approvals.
Additionally, because bridge loans are often paid back with a lump-sum liquidity event, bridge loan repayment is designed with cash flow flexibility in mind. Unlike amortizing loans that require larger ongoing principal and interest payments, bridge loans are often interest-only loans. This interest-only feature is designed to maximize cashflow during the interim bridge period, allowing for a large principal pay off to coincide with the future liquidity event.
Peace of Mind
We have observed that bridge financing can provide great peace of mind for clients navigating personal real estate transactions. In the case of new homes, bridge loans allow clients to focus on a new home purchase without having to worry about the stresses related to immediately selling their current home. For example, while market conditions may be ripe for buying, they may not be ideal for selling. Bridge loans can help clients avoid the fire sale of one asset to purchase another. Bridge loans also often reduce the anxiety associated with trying to simultaneously time the purchase of the new home with the sale of the old home, an incredibly difficult feat. Additionally, being able to maintain a current residence while gradually transitioning to a new one—due to renovations, decluttering, or just not wanting to be rushed—often facilitates a more relaxed and enjoyable move.
Cost Efficiency
Bridge loans offer clients a cost-efficient alternative to traditional financing. Establishing a mortgage is frequently time- and fee-intensive. Why go through this costly and laborious process if you don’t have to, especially if the financing need is short-term? Lines of credit (LOCs), a popular type of bridge loan, are often easy and inexpensive to establish, and typically don’t cost anything to maintain until you use them. Borrowers who are willing to secure their lines of credit with more marketable assets do not pay interest on the total amount available (credit line limit), only on the amount they advance from the line (credit line balance).
Tax Efficiency
Bridge loans also provide a tax-efficient way to raise capital. Many of our clients have invested in the stock and bond markets for years and have seen their portfolios grow substantially. While this is good, the growth represents unrealized gains—a welcome problem until you sell. When sold, these unrealized gains become realized gains, which can lead to a large capital gain tax bill. Selling a portion (or all) of a portfolio to raise short-term capital can be incredibly tax-heavy, not to mention potentially harmful to portfolio performance from being out of the market. For example, our high-income-earning clients will pay close to 30% in combined federal and state taxes on their portfolio-related realized capital gains. Instead, leveraging the value of their portfolio by using it as collateral for a credit line provides a much more tax-efficient and attractive way to raise capital for bridge financing than selling out of the portfolio and incurring costly and unnecessary capital gains.
Bridge Loan Examples & Types
Unsecured Line of Credit
While unsecured credit lines can be used for bridge loans, they are rarely utilized for the larger purchases discussed in this article. Unsecured means there is no collateral in place to secure the line. Borrowers are approved based on their creditworthiness, not their collateral. This type of loan is riskier for lenders and more expensive for borrowers, often with higher interest rates. Not many banks are willing to offer large, unsecured credit cards or lines of credit.
But for borrowers with no collateral to pledge, or those with such an abundance of collateral that the lender approves them for a large credit line based on their “signature,” the tradeoff of not pledging an asset may be worth the higher interest rate.
As previously referenced, flexibility is an attractive feature of credit lines, both in structure (revolving vs. installment) and in repayment (interest-only vs. amortizing principal plus interest). Unsecured loans are often offered in lower amounts with higher interest rates, and for these reasons are less flexible and attractive than other bridge loan options.
Home Equity Line of Credit (HELOC)
HELOCs are a popular line of credit and bridge loan. Like credit cards and unsecured lines of credit, HELOCs are revolving lines of credit that can be accessed, repaid in full on the borrower’s (not lender’s) schedule, and then used again without additional underwriting. Unlike credit cards and other unsecured credit lines, HELOCs are secured loans collateralized by a borrower’s home equity. Underwriting and pricing vary from bank to bank, but because HELOCs are secured by a borrower’s primary residence, financial institutions are willing to extend larger credit lines at lower interest rates than with unsecured lines of credit. Banks assume that borrowers will repay the debt associated with their home above most any other debt rather than let the loan default and their home go into foreclosure. While there can be closing costs associated with establishing a HELOC, these costs are often waived, and when charged, are much lower than the closing costs associated with a traditional mortgage.
It is important to note that while HELOCs typically offer lower interest rates than unsecured LOCs, rates for both types of loans are variable, not fixed, and subject to change. HELOCs are often tied to the Prime rate, either priced at Prime or at Prime plus a spread (i.e. Prime plus 1%). For context, today’s Prime rate is 7.5%, lower than it has been since February 2023, but higher than the recent lows of 3.25% during March 2020.
Investment Account Secured Line of Credit / Margin Loan
Banks like collateral and, as a result, price secured loans more favorably than unsecured loans. However, banks would much rather receive payment than have to deal with a painstaking home foreclosure process. We bring this up not because we worry about our client being foreclosed on, but to illustrate how the marketability of collateral can impact loan pricing. The more liquid the collateral, the easier it is to sell, and therefore, the more attractive that collateral is to the lender. While primary residences are indeed marketable, they are not as readily salable as public stocks and bonds, assets that are priced daily by their respective markets.
It should be no surprise then that loans secured by regularly traded stock and bond portfolios are often accompanied by the most attractive of loan terms, beating out even the very attractive HELOC bridge loan option above. Unlike HELOCs, which are frequently based on the Prime rate, investment account secured LOCs and margin loans typically use an index such as the Fed Funds target rate plus a spread. These rates, like HELOC rates, are variable (for better or worse), but unlike HELOCs, the all-in rate for these loans is usually lower than the Prime rate.
In addition to offering more attractive interest rates, margin loans tend to offer more attractive and flexible repayment terms. For example, lenders allow margin loans to accrue and do not force borrowers to make even monthly payments. Instead, they allow for a lump sum payoff, including accrued interest, at some future point in time.
Traditional Mortgage / Construction-to-Permanent Loan
Traditional mortgages and related products such as construction-to-permanent loans (C-P loans) can also be used as bridge financing. However, traditional mortgage financing is generally a less attractive bridge-loan alternative than the previous options. For example, mortgage loans typically are time- and fee-intensive. Banks typically require much more underwriting and documentation paperwork with mortgages than with other types of loans. Mortgage loans are also amortizing installment loans, often with larger fixed principal and interest repayment schedules. Some borrowers may view the certainty of a fixed interest rate and repayment as an attractive feature. However, because we view bridge loans as a temporary financing option, we prefer the greater flexibility of the other bridge loans over mortgages.
Summary
Debt management can be a relevant subject no matter what your age or stage of life. For our Bragg Bootcampers, debt builds credit and assists in purchasing otherwise unaffordable long-term assets. For our more seasoned and established clients, debt plays a different but equally important role. Debt for our clients, particularly when used as a temporary bridge loan, can provide a uniquely flexible, cost-efficient, and tax-efficient financing tool. These bridge-loan benefits combine to provide general peace of mind and control for our clients during otherwise stressful and often overwhelming transitions.
This article was written as an introduction to bridge loan financing. Please know we are more than happy to take a deeper dive into any of the financing options discussed in this article. As always, thank you for choosing Bragg Financial Advisors.
This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.
Bragg Financial Welcomes Keffrey Foster
August 12, 2025Bragg Financial Welcomes Jaclyn Marker
August 25, 2025We recently completed our annual Bragg Bootcamp, a popular two-day introduction to financial planning for our clients’ college-aged children and grandchildren. This year’s class was completely full yet again! Some attend because they have a true thirst for financial planning; others, because their parents or grandparents made them. Regardless, we’re glad they are here! Evie Climer, a 2025 Bootcamp participant, fell in the latter “strongly encouraged to attend by her parents” category. Much to her chagrin, I had the pleasure of leading a Bootcamp session. The topic? Debt & Credit.
I suspect that debt and credit may not sound as exciting to these college students as our session on investing. Imagine discussing credit cards, loans, and credit reports while students are thinking, “How do we buy Crypto?” and “How do we invest in AI?. However, like the tortoise in Aesop’s fable, I persevered, and at the end, convinced our Bootcamp participants of the relevance of debt management.
Like their children and grandchildren at Bootcamp, our clients are often slow to warm to conversations about debt management. That is, until they need capital quickly! Then, just like our students, our clients often find the topic to be very compelling.
Our Bootcamp students primarily use debt to establish credit and purchase long-term assets they may not otherwise currently be able to afford, such as a car. On the other hand, clients of Bragg Financial leverage debt for the flexibility, peace of mind, cost efficiency, and even tax efficiency that it can provide. They may want to buy a new home before they have sold their current one, or to downsize into a condominium or continuing care retirement community without the stress of decluttering and moving in a short closing window. They might want to buy a second home before an unrelated expected liquidity event. Bridge loans are just the tool our clients need to facilitate the types of financial decisions that arise at more mature ages and stages of life.
Bridge Loans & Benefits
Bridge loans come in all shapes and sizes and are a general term for a variety of financing structures. These loans tend to be temporary in nature, bridging the gap between the purchase of one asset and the sale of another—hence, the term “bridge loan.”
Flexibility
From fast loan underwriting and approval to liberal repayment terms, bridge loans are typically more flexible than traditional loans, such as mortgages. Most bridge loans allow clients to borrow what they need, whenever they need it. This stands in contrast to traditional amortizing installment loans like mortgages, where once you pay down principal, you can no longer “go back to the well” for more loan proceeds—you must apply for a new loan if you need more money. Bridge loans are typically revolving credit lines, meaning that clients can borrow, repay the amount advanced in full, then borrow again from the same loan facility with no additional bank underwriting or approvals.
Additionally, because bridge loans are often paid back with a lump-sum liquidity event, bridge loan repayment is designed with cash flow flexibility in mind. Unlike amortizing loans that require larger ongoing principal and interest payments, bridge loans are often interest-only loans. This interest-only feature is designed to maximize cashflow during the interim bridge period, allowing for a large principal pay off to coincide with the future liquidity event.
Peace of Mind
We have observed that bridge financing can provide great peace of mind for clients navigating personal real estate transactions. In the case of new homes, bridge loans allow clients to focus on a new home purchase without having to worry about the stresses related to immediately selling their current home. For example, while market conditions may be ripe for buying, they may not be ideal for selling. Bridge loans can help clients avoid the fire sale of one asset to purchase another. Bridge loans also often reduce the anxiety associated with trying to simultaneously time the purchase of the new home with the sale of the old home, an incredibly difficult feat. Additionally, being able to maintain a current residence while gradually transitioning to a new one—due to renovations, decluttering, or just not wanting to be rushed—often facilitates a more relaxed and enjoyable move.
Cost Efficiency
Bridge loans offer clients a cost-efficient alternative to traditional financing. Establishing a mortgage is frequently time- and fee-intensive. Why go through this costly and laborious process if you don’t have to, especially if the financing need is short-term? Lines of credit (LOCs), a popular type of bridge loan, are often easy and inexpensive to establish, and typically don’t cost anything to maintain until you use them. Borrowers who are willing to secure their lines of credit with more marketable assets do not pay interest on the total amount available (credit line limit), only on the amount they advance from the line (credit line balance).
Tax Efficiency
Bridge loans also provide a tax-efficient way to raise capital. Many of our clients have invested in the stock and bond markets for years and have seen their portfolios grow substantially. While this is good, the growth represents unrealized gains—a welcome problem until you sell. When sold, these unrealized gains become realized gains, which can lead to a large capital gain tax bill. Selling a portion (or all) of a portfolio to raise short-term capital can be incredibly tax-heavy, not to mention potentially harmful to portfolio performance from being out of the market. For example, our high-income-earning clients will pay close to 30% in combined federal and state taxes on their portfolio-related realized capital gains. Instead, leveraging the value of their portfolio by using it as collateral for a credit line provides a much more tax-efficient and attractive way to raise capital for bridge financing than selling out of the portfolio and incurring costly and unnecessary capital gains.
Bridge Loan Examples & Types
Unsecured Line of Credit
While unsecured credit lines can be used for bridge loans, they are rarely utilized for the larger purchases discussed in this article. Unsecured means there is no collateral in place to secure the line. Borrowers are approved based on their creditworthiness, not their collateral. This type of loan is riskier for lenders and more expensive for borrowers, often with higher interest rates. Not many banks are willing to offer large, unsecured credit cards or lines of credit.
But for borrowers with no collateral to pledge, or those with such an abundance of collateral that the lender approves them for a large credit line based on their “signature,” the tradeoff of not pledging an asset may be worth the higher interest rate.
As previously referenced, flexibility is an attractive feature of credit lines, both in structure (revolving vs. installment) and in repayment (interest-only vs. amortizing principal plus interest). Unsecured loans are often offered in lower amounts with higher interest rates, and for these reasons are less flexible and attractive than other bridge loan options.
Home Equity Line of Credit (HELOC)
HELOCs are a popular line of credit and bridge loan. Like credit cards and unsecured lines of credit, HELOCs are revolving lines of credit that can be accessed, repaid in full on the borrower’s (not lender’s) schedule, and then used again without additional underwriting. Unlike credit cards and other unsecured credit lines, HELOCs are secured loans collateralized by a borrower’s home equity. Underwriting and pricing vary from bank to bank, but because HELOCs are secured by a borrower’s primary residence, financial institutions are willing to extend larger credit lines at lower interest rates than with unsecured lines of credit. Banks assume that borrowers will repay the debt associated with their home above most any other debt rather than let the loan default and their home go into foreclosure. While there can be closing costs associated with establishing a HELOC, these costs are often waived, and when charged, are much lower than the closing costs associated with a traditional mortgage.
It is important to note that while HELOCs typically offer lower interest rates than unsecured LOCs, rates for both types of loans are variable, not fixed, and subject to change. HELOCs are often tied to the Prime rate, either priced at Prime or at Prime plus a spread (i.e. Prime plus 1%). For context, today’s Prime rate is 7.5%, lower than it has been since February 2023, but higher than the recent lows of 3.25% during March 2020.
Investment Account Secured Line of Credit / Margin Loan
Banks like collateral and, as a result, price secured loans more favorably than unsecured loans. However, banks would much rather receive payment than have to deal with a painstaking home foreclosure process. We bring this up not because we worry about our client being foreclosed on, but to illustrate how the marketability of collateral can impact loan pricing. The more liquid the collateral, the easier it is to sell, and therefore, the more attractive that collateral is to the lender. While primary residences are indeed marketable, they are not as readily salable as public stocks and bonds, assets that are priced daily by their respective markets.
It should be no surprise then that loans secured by regularly traded stock and bond portfolios are often accompanied by the most attractive of loan terms, beating out even the very attractive HELOC bridge loan option above. Unlike HELOCs, which are frequently based on the Prime rate, investment account secured LOCs and margin loans typically use an index such as the Fed Funds target rate plus a spread. These rates, like HELOC rates, are variable (for better or worse), but unlike HELOCs, the all-in rate for these loans is usually lower than the Prime rate.
In addition to offering more attractive interest rates, margin loans tend to offer more attractive and flexible repayment terms. For example, lenders allow margin loans to accrue and do not force borrowers to make even monthly payments. Instead, they allow for a lump sum payoff, including accrued interest, at some future point in time.
Traditional Mortgage / Construction-to-Permanent Loan
Traditional mortgages and related products such as construction-to-permanent loans (C-P loans) can also be used as bridge financing. However, traditional mortgage financing is generally a less attractive bridge-loan alternative than the previous options. For example, mortgage loans typically are time- and fee-intensive. Banks typically require much more underwriting and documentation paperwork with mortgages than with other types of loans. Mortgage loans are also amortizing installment loans, often with larger fixed principal and interest repayment schedules. Some borrowers may view the certainty of a fixed interest rate and repayment as an attractive feature. However, because we view bridge loans as a temporary financing option, we prefer the greater flexibility of the other bridge loans over mortgages.
Summary
Debt management can be a relevant subject no matter what your age or stage of life. For our Bragg Bootcampers, debt builds credit and assists in purchasing otherwise unaffordable long-term assets. For our more seasoned and established clients, debt plays a different but equally important role. Debt for our clients, particularly when used as a temporary bridge loan, can provide a uniquely flexible, cost-efficient, and tax-efficient financing tool. These bridge-loan benefits combine to provide general peace of mind and control for our clients during otherwise stressful and often overwhelming transitions.
This article was written as an introduction to bridge loan financing. Please know we are more than happy to take a deeper dive into any of the financing options discussed in this article. As always, thank you for choosing Bragg Financial Advisors.
This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.
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