Bridge Financing

Scenario:  Your client’s closing date for the purchase of their new home is August 1 and the closing date of the sale of their old home is August 15.  They need the equity from their old home for the down payment of their new home.

Solution:  Bridge Financing.

Costs:  Reasonable!
It varies but there will be a fee of $250-$400 plus interest (P+2% or P+3%).  Note that the bridge loan is only the amount of down payment minus deposit so interest costs are minimal.   There will also be an extra  fee from the solicitor.  Things to note: 
  1. Usually lenders want less than 30 days difference on the dates.
  2. The payments for the long term mortgage are not affected by bridge financing.  For example the client's regular mortgage payment is on payment schedule.
  3. The buyer must still pay the property transfer tax, legal fee and other closing costs upfront from their cash resources.
  4. The buyer must stay with the lender that they do the bridging with. For example they might have a 5 yr variable with that lender.
  5. A low cost bridge finance must have 2 firm, subject free contracts otherwise we take the mortgage to a private lender and the costs increase dramatically.
  6. Application must be otherwise strong.
  7. Some clients have a false impression about bridge financing until details are explained to them. When handled properly bridging is very convenient for some clients
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