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Bridge Financing In Canada – The ‘Abridged’ Version

March 28, 2013

At MonsterMortgage.ca, we receive many questions from clients who call MonsterMortgage.ca looking for answers about Bridge Financing

On the March 28th episode of CP24’s ‘Hot Property’, the hot topic was on Bridge Financing – From time to time, Canadians find themselves in need of Bridge Financing; the loan they receive when they close on a new home, but still have yet to close on the sale of their current home.

Unless you have the ability to carry two mortgages and have pools of money available, you should always sell your existing home before purchasing a new one. Why you ask?

You have bought but not sold your existing home…what are your options?

Bridge Loan/Financing

If you have sold your existing home but your closing date is after the closing date of the property you just purchased then bridge financing is your best option:

Private Financing

If you have purchased your home and it is closing and your existing home has not sold then bridge financing is not available to you and you will have to take out a private loan:

• This option is expensive and is incumbent on their being enough equity in your property. Typically, private financing comes with a high interest rate i.e., 10-15% and an upfront lender fee + broker fee. These amounts will vary based on your specific situation i.e., time required for loan, loan amount, loan to value, credit, property location. While expensive, private financing (in most cases) will be cheaper than lowering the purchase price of your existing home by tens of thousands of dollars.

• Your bank cannot do this type of financing. You must use a specialized mortgage broker who has access to individuals that lend money out privately.

Market Rents

If you don’t have a closing date yet for your existing property you can rent out your property on a short to medium term basis to show that you can carry the mortgage on your new property.

• You will be asked to show market rents for similar properties in your neighbourhood

• Depending on your lender, you may need to show additional information as well including lease, post-dated rent cheques, etc.

Don’t forget to catch Canada’s premier Mortgage and Real Estate show on CP24!

Missed last week’s Hot Property? Don’t worry, MonsterMortgage.ca and CP24 have you covered!

Watch the last Hot Property here and get up to date with the hottest topics in the GTA Real Estate and GTA Mortgage market!