What Is Bridge Financing
Bridge financing is a specifically designed to help home owners close the purchase of a new property before the sale of their existing property. For example, if you list your existing home for sale in hopes to acquire the sufficient down payment for the purchase of your new home and the closing date for your new home is prior to the sale of your existing home, you would look to getting bridge financing as a temporary source of sufficient funds to close your purchase. You would continue to make the necessary monthly payments on your bridge loan until the sale of the existing property. It is also important to note that the lending institutions would secure the loan to both the existing and new properties until the existing property is sold. There are two main requirements that the borrower must meet when seeking bridge financing:
- A purchase and sale agreement for the purchase of the new property
- This purchase and sale agreement ensures that the “offer” to purchase the property has been accepted by the vendor/seller
- The firm sale agreement for the sale of the existing property
- The sale agreement of the property cannot be conditional because it has less of a commitment on the end of the buyer than does a firm agreement, which is usually accompanied by a deposit
Bridge financing has terms similar to an open mortgage with the understanding of the loan being a short term solution and is almost always accompanied by higher mortgage interest rates than traditional mortgages. However, since the term of the loan is short, the interest costs are insignificant over the long run. Canadian Mortgage Services has many financing solutions for all types of situations, and from a variety of different lending sources. Contact our team to learn more!