The Mortgage Path With Damian

If you’re planning to buy a new home before your current one sells, you might face a temporary cash flow gap. That’s where bridge financing comes in. It’s a short-term loan that covers your down payment or closing costs until your existing home closes.

Here’s how it works: You’ve found the perfect new home and want to put in an offer. But your down payment is tied up in the equity of your current property, which hasn’t sold yet. A bridge loan gives you access to that equity in advance, essentially “bridging” the financial gap.

When is bridge financing used?

• When the closing date of your new home is before your old one sells
• When you have enough equity in your current home to support the loan
• When you’ve already signed a firm sale agreement for your current home

Bridge loans are typically short-term (up to 90 days) and have higher interest rates than your mortgage, but you only pay interest for the time you use the funds. Some lenders also charge administration fees.

Things to keep in mind:

• You usually need a firm sale on your current property to qualify
• You’ll still need to qualify for the full amount of your new mortgage, including the bridge loan
• Bridge loans are not available through all lenders, this is where a mortgage agent can help

If you’re in the process of moving and need flexibility, bridge financing could be a lifesaver. Contact a mortgage agent to explore your options and ensure a smooth transition between homes.