Homebase Mortgages

Three Things You Need to Know about Bridge Loans

\"bridgeBridge loans are a great way to get the money that you need to buy a new home before your current one sells, but you’re going to want a Toronto mortgage broker to help you out! There are things you’ll need to know before you get one, and here we’re going to explore what bridge loans are and what they’re not. Let’s get started and see if they’re the right kind of financing for you!

What is a Bridge Loan?

A bridge loan effectively “bridges” the gap in financing that you need to get a new home. You’re going to have to be in the process of selling a home right now while buy a new one. If you’re just trying to sell or buy a new home, you won’t qualify for a bridge mortgage. Bridge loans are tricky, and you’ll need to be able to show lenders that you are financially capable of paying the mortgage. These are short term financing solutions, so the interest can run a little high. They will help you through escrow though and get you where you need to be.

How do Bridge Loans Work?

Bridge loans work like this:

You are buying a new home and trying to sell your old one. The home you own now may not have closed escrow yet, but you need to meet a deadline to buy your new home. A bridge loan will be able to help you make that deadline. The repayment times for this kind of loan will generally be less than a year, so keep this in mind before you borrow. This way you won’t get any surprises or make financing mistakes that will only come back to bite you later.

If you don’t want to take out a bridge loan, think about finding a lender who can give you a mortgage with more money and better terms instead. This is why it’s so important to work with a Toronto mortgage broker that understands your needs. You’re going to need that extra help to ensure that you’re getting the mortgage that fits YOU and not the other way around.

What are the Downsides of a Bridge Loan?

The downside of a bridge loan boils down to whether or not you can afford one. You’ll technically have three mortgages all at the same time; the note on your current home, the note on your new home and this bridge mortgage loan to worry about. This can be a serious problem if done wrong, so you’re going to want to talk to a Toronto mortgage broker before you choose this as your financing option. They’ll be able to help you evaluate the GFEs (good faith estimates) offered by the lenders. These will help you figure out if a lender is actually offering you a good smart deal in the long term or if they’re trying to pull a fast one on you. Visit our bridge loan page today to learn more!.

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