Sometimes, when you’re looking to buy a new home, not all of the real estate stars align. This is particularly the case in hot markets, when it can be hard to buy a new home or sell your old one.
This can lead to a situation where the closing dates for your old home and your new one are weeks or even months apart. When this happens, the best solution can often be bridging finance for a property purchase, or a bridge loan for a home purchase, as it is also known.
Qualifying for a bridge loan in Canada can be tricky, so we take a look at everything you need to know about bridging finance, including: the bridge financing meaning; how does bridging finance work; what you need to do to qualify for a bridge loan in Canada; bridging loan interest rates; how to use a bridging finance calculator; how much you can borrow with a bridge loan to buy a house; and some popular FAQs on bridge financing in Canada.
A bridge loan for a home purchase is used when you’ve bought a new home and its closing date happens before your old home closes. Bridge financing in Canada, therefore, is a short-term loan that allows you to put a substantial down payment on your new home before you’ve sold your old one.
Bridge financing when buying a house is typically fairly short-term. Most bridge loans in Canada have to be paid back within six to 12 months. A key advantage of bridging finance to buy property, compared to say a line of credit, is that you don’t have to make any regular loan payments. A bridge loan in Canada only needs to be paid off once you sell your old home, so you don’t need to find the money to make interest payments while waiting for your house sale to close.
Bridging financing rates in Canada tend to be higher than regular mortgage rates because they are only short-term loans.
What is a bridge loan’s advantages? The main advantage of bridge financing in Canada is that it gives you more time to sell your old home. Using a bridge loan to buy a house can prevent you from having to accept a lower offer on your old home.
