Mortgage Bridge Financing Loans

Are you in the process of buying a new home but haven't yet sold your existing property? Mortgage bridge financing can help bridge the gap and make the transition smoother.

What is a Bridge Loan?

A bridge loan is a short-term loan used to cover the gap between the purchase of a new property and the sale of an existing property.

This type of loan helps provide the necessary funding to help you close on a new property, while your existing property is being sold.

How Does a Bridge Loan Work?

A bridge loan is secured by the existing property and is used as collateral. The loan is typically used for a period of six months to one year, during which time the borrower makes payments on the loan, while also trying to sell their existing property. If the existing property is sold within the specified time frame, the loan is typically paid off. If the existing property is not sold within the specified time frame, the borrower may be required to extend the loan or refinance it.

Benefits of a Bridge Loan

Provides Immediate Access to Funds:
‍A bridge loan provides immediate access to funds, which can be used to purchase a new property before the sale of an existing property is completed.

Flexibility:
‍Bridge loans offer flexibility, as they can be customized to meet the specific needs of the borrower.

Minimizes Out-of-Pocket Expenses:
‍By using a bridge loan, the borrower can minimize out-of-pocket expenses, as the loan can cover the down payment and closing costs for a new property.

Avoids Contingency Clauses:
‍Bridge loans avoid the need for contingency clauses in real estate contracts, which can be a major obstacle in purchasing a new property.

Risks of a Bridge Loan

Higher Interest Rates:
‍Bridge loans typically have higher interest rates compared to traditional mortgage loans.

Short Repayment Period:
‍The repayment period for a bridge loan is typically short, which means that the loan must be paid off within a specified time frame.

Default:
‍If the existing property is not sold within the specified time frame, the borrower may be at risk of default on the loan.

Possible Foreclosure:
‍If the borrower is unable to pay off the loan within the specified time frame, they may be at risk of foreclosure.

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Bridge Financing FAQs

What is Bridge Financing?

Bridge financing is a type of loan that allows you to use the equity in your existing home as a deposit for your new home. The loan is designed to "bridge the gap" between the sale of your current property and the purchase of your new property. It is typically repaid when the sale of your existing property is complete.

Who is Eligible for Bridge Financing?

You are eligible for bridge financing once you have had your mortgage approved and have an accepted offer on your existing property. The lender will need to be assured that the sale price of your existing property is enough to cover the bridge loan.

What are the Costs Associated with Bridge Financing?

There are three main costs associated with bridge financing:

1. Lender Fees - Charged by the lender and can range from $300 to $600.

2. Interest - Based on Prime + Premium, where Prime is currently 6.70% and premiums range from 2-5%. For example, a bridge loan of $200,000 with a premium of 2.5% would result in daily interest of $32.60.

3. Solicitor Fees - For arranging the registration of the bridge loan against your existing property and its repayment, this fee is usually around $300.

How Long Does a Bridge Loan Last?

Typically, bridge loans are limited to 30-60 days, although exceptions may be made for longer periods based on the strength of the application.

The logistics of the bridge loan are handled by your lawyer, broker, and lender, and you don't need to worry about it.

Is Bridge Financing Available Through All Lenders?

Most lenders offer bridge financing, but it may not be available through all lenders. We offer bridge financing options to our clients.