No, it’s not a loan to build real bridges!
Bridge financing is provided by the lender when you’re stuck in limbo because you need to move into your new house before you receive all the money from the sale of your old house. Lets use an example to better illustrate.
Imagine you’ve sold your little starter home and the closing date is scheduled for April 24th. In the meantime, you’ve also purchased a bigger home and it’s scheduled to close 2 weeks earlier on April 10th. Most people don’t have a ton of extra cash lying around in their banks, so you’d likely be depending on the money you receive from the sale of your home to fund the purchase of your new home. The problem is, you’re buying a home without the cash in your hand yet! That’s where bridge financing comes in.
In this example, the banks will agree to lend you any shortfall of your down payment for the 2 week period so that you can move into your new home. The banks will charge you a small administration fee of between $300 – $600. Interest will be charged based on the number of days the financing is bridged, and is usually calculated based on the prime lending rate plus an additional percentage determined by the bank. Most bridge loans are limited to a maximum of 90 days, but check with your lending institution for their policies and rates.
Bridge financing is an excellent way to close the gap between your sale and your purchase.
Give us a call if you’d like to know more about how bridge financing will help you when you buy your next home! We provide the lowest rate mortgages in Mississauga!by