Don’t let buying your next home be stressful!

Let’s take a deep dive into what bridge financing is and how you can benefit from it.

Trying to synchronize the purchase of your new property with the sale of your current home can encompass many challenges at the best of times. Buying a new home requires a down payment and for many second-time buyers, your down payment is coming from the built-up equity in your current home. Therefore, the completion date on the sale of your home would need to close on the day of, or before the completion date of your newly purchased home.

However, there are circumstances when the completion date of your sale takes place after the completion date of your purchase, leaving you without a key component of your purchase – the equity you need to use for your down payment! In this case, bridge financing will likely be your best option.

Buying your next home doesn’t need to be stressful and is exactly why Boychuk Mortgage Group takes pride in ensuring your mortgage process is an easy, organized, and stress-free experience from start to finish.

Let’s look at some of the frequently asked questions below regarding bridge financing and how this type of loan can benefit you.

  • What is Bridge Financing?
  • What are the Advantages of Bridge Financing?
  • What are the Requirements for Bridge Financing?
  • What are the Costs Associated with a Bridge Loan?
  • How Do I Get a Bridge Loan?
  • How Does this Loan Get Repaid?
  • How Do I Get a Bridge Loan?
  • Bridge financing is a short-term, temporary loan that is designed to help homeowners like you, “bridge” the gap between the sale of your existing property and the purchase of your new home. This allows you to access your equity for your down payment on your new purchase, while you wait for the sale of your existing home to complete.
  • Bridge financing allows you to make quick moves in hot markets, purchasing your new home before yours sells.
  • Bridge financing provides you a peace of mind, knowing that you have more time to sell your home for the price you want.
  • Bridge financing allows you to use the equity in your home for the down payment on your next home.
  • Bridge financing gives you the opportunity and funds to make upgrades to your new home before officially moving in.
  • Once your mortgage has been approved on your new purchase and you have a firm sale agreement in place on the sale of your existing property, you will be eligible for bridge financing.
  • The reason your lender will require a firm sale agreement in place is so they can confirm you have enough equity to cover the bridge loan, and otherwise, the total remaining down payment.

Typically, there are three main costs associated with bridge financing

  • Interest
  • A typical interest rate on bridge loans today will fall in the range of prime + 2.5% to prime + 5.0%.
  • For example, on a bridge loan of $250,000 at a prime rate of 2.70% and a premium of 4.0%, your bridge loan cost you $45.89 a day.
  • Lender fee
  • This is not a fee that we charge, but rather a fee the lender collects. This cost can range from $300 - $600.
  • Legal fee
  • When legally binding your bridge loan at your legal team’s office, a fee of around $300 is typically charged for contractually arranging and registering your bridge loan on the title. This step is similar to securing your mortgage and ensures the lenders security, knowing that they will soon be repaid.
  • Your bridge loan will typically last for 30 to 60 days with the possibility, or exception to extend it past 60 days, based on the circumstances and strength of your file.
  • The repayment of your bridge loan is handled on the back end by our mortgage team, your legal team, and the lender.
  • Following the final sale of your prior home, the net proceeds will be set to transfer over, and your mortgage will kick in.
  • We recommend that you contact one of our team members to walk you through each step of the loan process. While not every lender offers the option of bridge financing, our team will be able to educate you on what you need to know and the steps to take to secure your bridge loan.