Bridge Financing / Interim Financing.

We answer many questions about Bridge Financing, (also known as Interim Financing), and we realize that it can be a confusing issue for those who don‘t deal with it on a daily basis. Here is a simple explanation of the process. Please know that we will try to resist any cheap jokes about buying bridges or financing gambling debts!

Bridge Financing is required when you are selling a home and buying a new home at the same time. This type of loan is simply short term financing required to bridge the gap between the time you have to pay the balance of money owing for your new home, and the date you receive funds for the sale of your present home.

For example:

• You have purchased a new house for $300,000 and you will take possession on July 1st. You need 10% ($30,000) to put down on your new home.
• At the same time, you sell your current home for $250,000 with a closing date of August 1st. You own this home free and clear and will therefore receive $250,000 (less minor legal costs etc.) on August 1st.
• The problem? You will not have your money to put down on or before July 1st to purchase your new home. This means that you will need to borrow $30,000 to pay for your new house one month earlier than you will receive the funds from your old house. You need Bridge Financing.

Be forewarned that Bridge Financing is not cheap. In fact, it can be very expensive depending on where and when you get it. Timing is everything! If you can anticipate the need for early funds or if you can change your closing dates to avoid interim financing, you will save a lot of money!

As always, preparation is the key. If you think you may need an interim loan, talk with your realtor or mortgage agent here at Unisource. If Bridge Financing is your only solution, we can help you pre-plan, explore all the options, and walk you through the process.

Source: Unisource Mortgage Canada Newsletters Archive