How Bridge Financing Can Help You
If you need the funds from your current home sale to purchase a new one, your lender may have suggested a bridge loan as a short-term financial solution. But what exactly is a bridge loan, and how does it help homebuyers? Here's what you need to know about bridge financing.
What is Bridge Financing?
Bridge financing is a type of interim lending that homeowners can obtain between the sale of their current home and the closing of their new home. As its name suggests, this type of financing is commonly used as a "bridge" for mortgage borrowers who need the proceeds from the sale of their home in order to pay the down payment on their new property. Most banks, credit unions and other prime lenders have a certain amount of money reserved for bridge financing that they offer to borrowers who need it.
How Bridge Financing Can Help
One of the top benefits of bridge financing is that it is available on a short-term basis. Whereas most other types of loans are designed to be repaid over a long period of time, bridge financing is structured so that the loan is repaid within a limited period of time -- sometimes as short as a few weeks. This doesn't mean, however, that bridge financing isn't available for long-term expenditures. some lenders will offer bridge financing for an extended period of time as long as a second mortgage is registered on the title of the home being sold.
Another benefit of bridge financing is that it can help improve a borrower's credit rating. As long as the bridge loan payments are made on time, the borrower's credit rating will improve, allowing them to qualify for long-term financing at a lower rate than they would otherwise be eligible for.
Apply for Bridge Financing Today
If you're planning to sell your home and move into a new one, a mortgage broker in Edmonton can help arrange bridge financing to cover your interim costs. Contact us today for a free, no obligation consultation.