Back to Blog

Bridge Finance

General Denise Dunkley 13 Jan

‘BRIDGE FINANCE’ may be required when timing is an issue caused by closing dates that do not match.

Examples: if your closing date of the home that you are selling and the moving date of the home that you are buying are not on the same date (as in cases of relocation). Another scenario is when the sale of ‘other homes’ becomes involved causing a ripple-effect or ‘chain-effect’. In fact, quite often it’s simply a matter that the home buyers want to take possession of the home they have purchased prior to the closing of their own home sale so that they can perform renovations or painting before moving into it.

With a “firm” sale of your home you can usually “borrow against the sale” of your home which is referred to as bridge financing or obtaining bridge loans. The bridge finance funds are advanced and then paid back once the sale of your own home closes on the later date. This finance is replaced by the new and “final” mortgage arranged.

Requirement: *In arranging bridge finance, it is important to provide your mortgage agent upfront both complete copies of accepted/firm Offer to Purchase and Sale Agreement with all Waivers/Fulfillment Schedules – signed by all parties.

The bridge loan amount required to close the transaction is determined by taking the sale price of the home you are selling and deducting the costs to pay off all current mortgages or secured lines of credit (including any prepayment penalties), real estate agent commissions for selling the home, and legal fees for the lawyer to complete the sale transaction. This net figure then becomes the basis for the bridge loan.

The cost of bridging varies with lenders and is based on mortgage interest cost per day(s) required; and is similar to the cost to borrow on regular mortgage loans. There may also be a set up fee (typically around $200 to $250).  The overall cost factor is usually outweighed by the convenience and benefits giving the ability to close the transaction on time. For the small cost and time involved in obtaining bridge financing upfront, it is well worth it!

Contact me today to arrange your finance

ddunkley@dominionlending.ca