Bridge Financing

✨Bridge Financing✨

Bridge financing, also called a bridge loan, is a way to help bridge the gap between buying a new property and selling an existing one, as it allows you to carry the mortgage on two properties for a short period of time. Bridge loans are used to cover the down payment and closing costs for your new purchase while waiting for your current home to sell.

When to use a bridge loan?✨

1. If you’re buying a new property before selling your existing property.

2. If you need the down payment for your new purchase to come from the equity in your current home.

3. If you want time between closing dates. This time can be used to upgrade the property before moving in, allow you to move on your own time.

4. You’ve found the perfect place and want to act before someone else swoops in.

What are some factors to consider before deciding if a bridge loan is right for you?✨

1. Interest. Although they are short-term, bridge loans have interest rates similar to open rate mortgages, which are often higher than the interest rate you may be used to paying with your current mortgage.

2. Cost. You pay for the bridge loan on top of both your mortgage payments, until the sale of your home has closed.

3. Risk. If your sales agreement falls through on your current house, you may have to pay two mortgages until a new sale is finalized.

How is the a bridge loan calculated?✨

If the closing date for your new home is in 30 days, but the closing date for your existing home in 45 days. A bridge loan will cover the 15 days in between.

Here’s how: If your current home is worth $500,000 and you owe $350,000 on your mortgage, you may be eligible for a $150,000 bridge loan, as you have $150,000 worth of equity in your home. Once your current home sells, that equity is used to repay your bridge loan.

In a buyers market bridge loans rise in popularity, due to the uncertainty of how long it will take to sell your home. If you would like to learn more about bridge loans, let’s chat!✨