WHAT IS A BRIDGE LOAN?

When there is an unconditional offer to sell and purchase at the same time, then a bridge loan can be considered.

As the name suggests, a bridge loan helps borrowers to "bridge" the gap between the sale of one home and the purchase of another, when the proceeds of sale are needed for down payment, but won't yet be available. Bridge financing allows the down payment to be accessed early from the equity in your home, however, to reiterate, there must be a subject-free sale contract in place.

Bridge financing would be available to you through the lender providing your mortgage financing on your new purchase, as a convenience to help facilitate your longer term financing needs. For those looking only for a short term solution (i.e. downsizing, with plans to pay off any balance owing from the proceeds of sale), other options may be available and better suited to your needs.

Typically, all parties on title of the home being sold must be on the bridge loan as well, so if there will be changes to who is on title for your new purchase (i.e. divorce, co-signers), please be sure to let us know.

WHAT COSTS MAY BE INCURRED?

Bridge Administration Fees (varies lender to lender)

This type of financing usually requires a fee paid to the lender ($400 - $600).

Interest Accrual Rates (varies lender to lender)

Interest is accrued daily on the funds that are lent out. Rates range from Prime + 2.0% to Prime + 5.0%.

Legal Fees

Depending on the size of the loan and bridge financing, this may range from $2,000 to $5,000. Please confirm with your lawyer or notary

NICE TO KNOWS

• Bridge loans are only offered by the mortgage lender providing financing on the home purchase.

• Confirmation that both the Sale & Purchase are subject free is required via signed contracts and addendums.

• The disbursement of funds takes place at the lawyer/notary's office and is handled directly by them.

• Costs incurred are calculated and administered by the lawyer/notary.

• There is a maximum length on the term of bridge loans. This varies lender to lender, but often ranges from 45 - 120 days.

• If there will be changes to who is on title from the property being sold to the property being purchased, this may cause issue; typically all parties on title for the home being sold must be on the bridge loan as well.
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ALTERNATIVES

If bridge financing is not an option, other possibilities could include:

• Gift from family
• Utilizing a HELOC
• Private Financing
• Inter-Alia (application dependent)