While the interest rate on your bridge loan is higher than your mortgage rate – usually Prime + 2.00% or Prime + 3.00% – it will only be charged for a short period of time, before the equity from your previous home will be available to repay the loan. Like any loan, a bridge loan is subject to interest – often at a rate similar to an open mortgage or a personal line of credit. In this situation, you’d need a bridge loan for the difference between your deposit and your total down payment. The trouble is your purchase close date is February 15th, 2014, and the sale of your existing home doesn’t close until April 10th, 2014. A bridge loan will cover your equity over the 55-day period (90 days – 35 days).įor example, let’s say you are purchasing a $350,000 home and you made a 5% deposit ($350,000 x 0.05 = $17,500), but you want to put down the $165,000 of equity you have in your existing home. Let’s say the closing date for your current home is 90 days away, while the closing date for your new home is in just 35 days. For larger, longer loans, however, they may need to consider doing so this will be more expensive, as legal fees will be involved. For example, on most bridge loans, the lender will not register a lien on your property. If you require a larger loan or a longer amount of time, your lender will evaluate your situation on a case-by-case basis and more work may be required. Most lenders are comfortable lending up to $200,000 for as many as 120 days. Some smaller lenders may not be able to offer you bridge financing though, so it’s always a good idea to discuss your options with your mortgage broker. Bridge financing is the tool used to help borrowers who find themselves in this situation.īecause bridge loans are so common, all of the big banks – including TD, CIBC, Scotiabank, RBC and BMO – offer bridge financing to their mortgage customers. Unfortunately, sometimes you get stuck in a situation where the closing date for the home you’re purchasing is before the closing date of the home you’re selling, leaving you without a down payment for the new home because it’s tied up in equity. And most home owners will want to take equity from their existing home and use it towards the purchase of their new home. At some point, you’ll want to sell and buy a new home – either to upgrade or downsize or move locations. It’s unlikely that the first home you buy will be the home you stay in forever.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |