So you bought a new house and your old one has not sold, but you removed the conditions . . . so you need to close on the old one or you will be in a pickle.
This is when bridge financing comes into play. A bridge loan is a temporary mortgage loan used to bridge your two mortgages until you sell your old house.
Here are five things you need to know:
- You will need to provide the lender with a firm agreement of sale before they consider a bridge loan.
- Your credit must be in exceptional shape and you will be able to meet the lender’s criteria for a bridge. You cannot assume you will qualify for this financing.
- You will need to have equity in your current home. The bridge mortgage is secured by the equity in your home and will never exceed the equity in your current home.
- Your lawyer will be required to register a mortgage if the sale of your existing home collapses (this is not common).
- These types of loans are normally for ninety days; however, there can be a longer term of a year, which means they are expensive.
The lending institution for your new home will normally provide you with your bridge loan. There are also private lenders, but they are normally more expensive.
If you are caught between houses, there is a solution. But with every mortgage, you need to be prepared to go through the process.
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