Current homeowners looking at selling their existing home and purchasing another can have specific needs that first-time homebuyers don’t have to be concerned with.
What happens when the closing date for the purchase of your new home lands BEFORE the closing date of your current home? How can you make the downpayment for the new mortgage when the money is tied up in your current home?
As a Grimsby Mortgage Broker, I am often contacted by clients stressed out as they have an accepted offer on a new purchase and have received an offer to purchase their existing home, with a closing date after the closing date of the new purchase. “What do we do, how do we provide a down payment that was coming from the sale of our house?”
What could go wrong, you ask?
In a perfect world, the closing date of the new purchase and sale of the existing home would be on the same date. As you know we don’t live in a perfect world and more times than not, the dates don’t align. In addition, it can sometimes leave things down to the wire for all the i’s to be dotted and t’s crossed with the banks and lawyers to allow everything to go through all in one day. It is unlikely to have things all happening on the same day and this can also be risky if one of them cannot close for some reason. More information on when you can move into your newly purchased home can be found here.
Good news! There is a solution!
The good news is we can help to arrange a “Bridge Loan” in conjunction with the mortgage to facilitate the purchase. A “Bridge Loan” is a loan against the equity in your current home in the amount required for the down payment to complete the purchase. This is different than a second mortgage, which you would take in addition to your first one on the same property and you are not planning to move.
How do I qualify for bridge financing?
To qualify for bridge financing, you must have sufficient equity available which is verified by the difference between the sale price and your existing mortgage balance. You must also have a “Firm Offer” on your existing home. Until your sale closes you are charged interest on the balance of the loan. Then, once your sale closes the Bridge Loan is paid off in full.
Many clients often take advantage of Bridge loans as they purposefully want the purchase to close before the sale to give themselves time to make improvements, such as painting or new flooring, to their new home prior to moving in.
Don’t hesitate to reach out to your Grimsby Mortgage Broker for more information.