Bridge financing, also known as a bridge loan, is a short-term loan that is typically used to “bridge” the gap between the purchase of a new property and the sale of the borrower’s current property. In other words, it allows homeowners to purchase a new home before selling their current one.
Why is bridge financing so popular in Canada?
In Canada, bridge financing is becoming increasingly popular as it allows homeowners to move into their new home right away, without having to wait for the sale of their current property.
How do you qualify for bridge financing?
To qualify for bridge financing in Canada, borrowers typically need to have a strong credit score and a significant amount of equity in their current property. They will also be required to provide proof of income and a clear timeline for the sale of their current property.
Bridge loans are calculated based on the borrower’s equity in their current property, their credit score and income, as well as the value of the new property. The loan amount will typically be a percentage of the value of the current property, usually between 60-80%.
Who offers bridge financing?
It’s important to know that not all lenders will offer bridge financing, and some that do will be very restrictive in the type of bridge that they can offer. Luckily we work with dozens of lenders and if a bridge loan is something that we deem a requirement for you then we will shop around to insure that we pair you with a lender that offers maximum flexibility and the lowest cost for a bridge loan.
What are the pros and cons to bridge financing?
There are several pros and cons to bridge financing in Canada. One of the biggest advantages is that it allows homeowners to move into their new home right away, without having to wait for the sale of their current property. However, it is important to keep in mind that bridge financing typically carries a higher interest rate than a traditional mortgage. Additionally, it can be difficult to qualify for a bridge loan if you have a low credit score or limited equity in your current property.
The typical term for a bridge loan is usually between 6-12 months, although some lenders may offer longer terms up to 24 months. It’s important to note that the term of the loan is usually shorter than a traditional mortgage and the borrower is expected to pay off the loan in full or refinance into a traditional mortgage within the given term.
The process of getting a bridge loan can vary depending on the lender and the borrower’s qualifications. Generally, it can take anywhere from a few days to a few weeks to get approved for a bridge loan. However, it is important to keep in mind that the sale of the current property should also be taken into consideration when estimating the time frame for the whole process.
Yes, it is possible to use bridge financing to purchase a rental property. However, it may be more difficult to qualify for a bridge loan if the rental property is not your primary residence. Additionally, the lender may require a larger down payment and a higher interest rate. Reach out to us if you have any concerns about bridge financing on a rental property
The maximum loan amount for bridge financing in Canada varies depending on the lender and the borrower’s qualifications. However, it is typically based on the equity in the borrower’s current property, the value of the new property, and the borrower’s credit score and income. It’s important to note that it is typically lower than a traditional mortgage loan. For example, It may range from 50-80% of the value of the current property.
The cost of a bridge loan can vary depending on several factors, including the lender, the loan amount, and the terms of the loan. Typically, bridge loans carry a higher interest rate than traditional mortgages because they are considered a higher risk for lenders. Additionally, some lenders may charge origination fees or closing costs for a bridge loan. It is important to shop around and compare rates and fees from multiple lenders to find the best deal.
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