If you have ever bought and sold a house and closed both on the same day you will understand why it makes a lot of sense to bridge your mortgage. You are packing up the same day, your buyer is waiting to move in. Getting a bridge means less stress for sure.
A bridge simply means the lender will forward the down payment or the equity in your property to enable you to close the purchase of your new property ahead of the closing of the sale of your property.
But it does not come without cost. Costs to set up a bridge vary from lender to lender and come with a daily rate of interest until your sale closes. For instance, with a set up fee of $250 and a month delay in closing for a $100K bridge you are looking at about $300. Not bad considering you can take your time to move in, paint or renovate.
You need equity in your home in order to bridge a firm sale. Most bridges go without a hitch but there are always the exceptions. With major banks taking collateral mortgages on properties, securing 2nds and visa cards unfortunately problems can arise.
Take for example our latest call for help. Moving van filled day of closing on their purchase, a local businessman called panicking that his bank didn’t not forward the money for the bridge. Joseph was mortified. The bank had told him the bridge was no problem. We got involved immediately and the problem was pretty evident. There was no equity in the home they had sold because the bank had secured a line of credit in 2nd position after their 1st mortgage. Yikes. No equity…no bridge and the bank did not tell him this and just left him high and dry. We found a solution rather quickly. We refinanced their free and clear cottage in order to get the down payment for their new home and the mortgage closed three days later. In our experience, do not take anything for granted when it comes to bridges. People believe their homes are free and clear when they are not since the banks often take much more collateral than the amount of the mortgage and even blanket multiple properties. Far too often the client is not told these things either by the bank and believe it or not the lawyer too. When you deal with The Price Team we ensure you completely understand what is going down. You’ll have far less hassle since we are professionals who take great care in what we do.
As an aside, if you are thinking of getting your next mortgage from a bank, ask them about their Collateral Mortgage product. If you are not satisfied with their answers, then do yourself a favour and come see us.