When selling one home to purchase another, it can become a tricky situation if you find your dream home before your current home has sold. The best solution is bridge financing.
What is bridge financing?
Bridge financing in essence “bridges” the financial gap between your current home and your future home. It will enable you to put a down payment on the new property, and the short term loan will be paid back once the current home sells. Another way it could help is if you’re building a new home and need construction financing before selling the old home. There are many opportunities where bridge financing can work to your advantage.
How do you get a bridge loan?
In most cases, the bank where you’re arranging your mortgage will give you a bridge loan. Generally, the interest rate will be slightly higher than a regular line of credit. Since it’s only for a short time (hopefully), the banks feel they need to charge more to make a buck! They also like to add on an admin fee which is very negotiable!!
Why should you get bridge financing?
What if the person purchasing your home suddenly runs into issues getting their mortgage or other funds in place before the closing date? This could hold up the money you require in order to pay for your new home. So to avoid any unforeseen costs, such as storage fees, financial or legal penalties and even cancellation fees for work on your new home, bridge financing would have you covered.
When it comes to changing homes, it can be as much excitement as it is stress. Bridge financing can help make the transition a little smoother for you.
