Bridge financing


There may come a time when you want to sell your current house and buy a new one.  However, you may be having trouble getting the closing dates to align.  Or, for convenience, you would like to move into your new house first before having to move out of your current house. Bridge financing from an Ottawa mortgage broker may make the move easier.  Also, it can allow you to complete any renovations, if needed, before moving all your belongings in.

The challenge with closing on your new house first is that you may need the funds from your existing house for the down payment on the new house.  If your current house sells after the closing date of the new house then you need a way to access the equity from your current house early.  The equity to use for the down payment.

Bridge financing can assist:

This is where bridge financing can assist.  Bridge financing allows you to use some of the equity in your current property towards the down payment on the new property.

It’s important to note that bridge financing requires you to have a firm agreement on your purchase.  As well as, a firm sale agreement on your existing home. A firm agreement is where conditions have been waived on the house you are buying. Also, for the house you are selling.

If your current house has not sold yet then bridge financing is not possible.  In that case, other options would need to be explored such as refinancing your current house to access some of the funds needed for the down payment on the new house.  This would then be paid out once your current house sells.

Budgeting your monthly cash flow is important when exploring bridge financing. You will have your current mortgage payment, the new house’s mortgage payment and the bridge loan payment.

Bridge financing cautions:
  • Some lenders do not have a bridge financing option. It's important to let your Ottawa mortgage broker know you may require a bridge loan early in the process.  This way they can seek lenders that offer them.
  • You may not have enough equity in your house for the bridge loan you desire.  In this case you will have to come up with the shortfall of funds yourself on closing.
  • Bridge loans are at a higher rate then your mortgage and some lenders will charge a set up fee.
  • Bridge loans are typically restricted to a maximum of 90 days.

Contact a mortgage broker in Ottawa today to apply for bridge financing

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