What is Bridge loan financing? Who Needs a bridge loan?

What is bridge financing?

A bridge loan is a sum of money lent by a bank to cover an interval between two transactions. Typically the buying of one house when selling another. In simple terms Bridge loans are used when you have a firm sale on a current property, and you want to use the equity for the purchase of a new home. In this bridge loan scenario, the sale of the current home will close after the possession date of the new home. So You will not have your money yet from the sale. The bank will then lend you that money to close your new purchase,

Who needs a bridge loan?

Someone negotiating 2 deals, a sale and a purchase and require the equity out of the sale to purchase the new property. The bridge loan will give them flexibility to negotiate on both deal without an exact possession date. It is also great for people that want to slowly move into their new property without the rush of a specified date. It can take the stress off.

How long are bridge loans good for?

Bridge loans are normally good for a few weeks to a few months. It is most common for a few weeks.

How do bridge loans work in Canada?

Bridge financing in Canada is not accepted by every financial institution, so make sure you talk to us before you assume your bank does bridge financing. Some banks will charge for it, and other will not.

What are the risks of a bridge loan/ Bridge financing?

The major risk is that the buyer for the current property backs out and forfeits their deposit. If this happens, you will be responsible for both loans, and the bank make force a sale.

Is bridge financing good?

Yes I believe bridge financing can be amazing in the right circumstance. It allows you to take possession of your new home, while still essentially owning the old property.