Bridge Financing: What’s holding you back?
Bridge Financing Explained: Why It Might Be Right for You
Let’s face it—predicting when you’ll find your dream home and how long it’ll take to sell your current one can feel like trying to win the lottery. We’ve seen a lot of people stress out over this, especially when it comes to bridge financing. But here’s the thing: the joy of snagging that perfect home far outweighs the stress of trying to time everything just right. Bridge financing is a great tool to help you get what you want—and it’s not as scary as it sounds.
Why Bridge Financing is More Common Than You Think
You might be surprised, but about 20-30% of homeowners use bridge financing when they’re buying a new home. It’s pretty popular, so big banks like TD, CIBC, Scotiabank, RBC, and BMO all offer bridge financing. However, some smaller lenders might not have this option, so it’s always a good idea to chat with your mortgage agent about your choices.
Take Sarah and John, for example. They were hunting for their dream home for months, and when they finally found it, they hadn’t sold their current home yet. They were worried they’d lose out if they waited to sell first. Thanks to bridge financing, they were able to buy their new home right away and take their time selling the old one without all that pressure.
Fast Track Your Move
Most lenders are okay with giving you up to $200,000 for 30-120 days. If you need more money or time, they’ll look at your situation individually. Usually, for standard bridge loans, the lender won’t even put a lien on your property. But if you need more money or time, they might have to, which could add some extra costs, like legal fees.
Think about Emily and Tom. They found an awesome house but wanted to fix it up before moving in. They hadn’t sold their old home yet and didn’t want to live in a construction zone. Bridge financing let them buy the new place and stay in their current home until the renovations were done. It made everything so much easier for them.
Bridge Loans: Understanding Interest Rates
Just like any other loan, bridge loans come with interest. The rate is usually similar to an open mortgage or a personal line of credit. Yes, the interest rate on a bridge loan is higher than your regular mortgage—typically Prime + 2.00% to Prime + 3.00%, and sometimes even up to 6% to 10%, depending on the lender and your financial situation. But don’t worry, it’s only for a short period until you get the equity from your old home. Plus, there’s usually a flat administration fee, which can be between $1,000 and $2,000. If your loan goes over $200,000 or lasts more than 120 days, a lien might be put on your property, and you’ll need a real estate lawyer to remove it.
Mark and Lisa found themselves in a similar situation. They wanted to upgrade to a bigger home for their growing family but hadn’t sold their current house yet. They didn’t want the hassle of moving into temporary housing. Bridge financing allowed them to buy their new home and stay in their current one until the move-in day, making the whole process smooth and stress-free.
Should You Consider Bridge Financing?
If you’re wondering whether you qualify for a bridge loan, it’s actually pretty simple to find out. You’ll need a copy of the Sale Agreement from your current home and the Purchase Agreement for the new one. If you don’t have a firm selling date yet, you might need to look at private lenders since most banks require that detail. To explore different mortgage financing options and see how they compare, you can visit the Financial Services Regulatory Authority of Ontario (FSRA) Mortgage Resources.
James, for example, found a home that was perfect for him, but the market was super competitive, and houses were flying off the shelves. He didn’t want to risk losing the house by waiting to sell his current home first. Bridge financing gave him the ability to jump on the opportunity and make an offer before anyone else.
Moving Forward
Bridge financing can indeed be a game-changer when timing the sale of your current home with the purchase of your dream home. But did you know that understanding mortgage financing can simplify this process even more? If you’re curious about how different mortgage options might work for you, this article provides valuable insights that could be the key to making the best financial decision for your situation.
Bridge financing might sound intimidating at first, but once you understand how it works, it’s a game-changer. It opens up possibilities you might not have considered and can make buying and selling a home a lot less stressful.
If you’re thinking about making a move and are curious about whether bridge financing is right for you, let’s explore your options together. The right strategy can help you get into your new home without all the hassle, and we are here to help you make that happen. Let’s get started on making your next move the smoothest one yet!
Please note that the following details may vary depending on fluctuations in interest rates and updates to bank policies.
