Understanding Bridge Financing Imagine you’ve found your dream home; right location, right neighbourhood, right price, just perfect! There’s only one problem, the sellers of your dream home want to move out in the next 30 days. Your current home doesn’t close until days after that.
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You won’t have the downpayment needed to close this dream home until your current home closes. What do you do? You don’t want to lose this home just because of a few days.
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This is where Bridge Financing comes in and helps you seal the deal!
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Bridge Financing is a short-term loan that bridges the financial gap between the time your current home closes and the new one closes.
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aprox $250-$350 (depending on the lender).
• The interest rate varies from lender to lender, however on the norm it is usually prime plus two and in some cases it can be prime plus five with no admin fee.
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Here is an example;
• you sell your current home for $450,000
• your current mortgage is $240,000
•your estimated closing cost are $25,000
•this leaves you with $185,000 net proceeds.
•you purchase a home for $575,000
•your deposit paid is $30,000
•you have decided to use $150,000 from the net proceeds as your downpayment
•your new mortgage will be $395,000
•you will need $150,000 for your bridge loan
• the lending rate for this scenario is prime plus 3 (total of 6%)
• estimated borrowing costs for 30 days are aprox $739.22
Bridge  Financing  is  a  short-term  loan  that  bridges  the  financial  gap  between  the  time  your  current  home  closes  and  the  new  one  closes Â
Here’s what you need to know about Bridge Financing; • In order to obtain bridge financing from the lender, you will need to present a FIRM oer on both properties (you current and your new dream home).
• This type of financing is meant to be short term and is not often longer than 60 days.
• During the bridge you will be responsible for payment on your new mortgage (dream home) and the bridge loan.
• Normally there is an administration fee from the lender to process the bridge
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As you can see it‘s not as scary as most people think. Bridge Financing is a great tool to use if your closing dates don’t match up or if you want those extra few days to paint, clean the carpets, etc, before you move into your new dream home.
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Bridge Financing should be utilized not feared!
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If you have any further questions about financing your new home, ask your Mortgage Broker or Agent
! L A Mortgage Team (905) 581-7407 la@lamortgageteam.com 600 Brant St Burlington, ON, L7R 2G6
L A Mortgage Team, Mortgage Intelligence, Brokerage # 10428, 600-5770 Hurontario St, Mississauga, Ontario, L5R 3G5