Bridge Financing: How to Buy Before You Sell (Without the Stress) 🌉🏠

Bridge Financing: How to Buy Before You Sell (Without the Stress) 🌉🏠

Bridge the gap between your "Sold" sign and your new keys.

Have you found your dream home, but the possession date is before the closing date of your current home? Don't panic! This is a common scenario in real estate, and there is a specific tool designed exactly for this moment: Bridge Financing.

If you are trying to juggle moving dates and down payments, here is everything you need to know about bridging the gap.

What is Bridge Financing? 🤔

Bridge financing is a short-term loan used to "bridge the gap" between the purchase of your new property and the sale of your existing one.

Here is the most common scenario: You need the equity from your current home to pay the down payment on your new home. However, you get the keys to the new house a few days (or weeks) before the money comes in from your old house sale.

A bridge loan advances you that equity so you can close the deal smoothly. ✅

Why Use a Bridge Loan? The "Stress-Free Move" Strategy 🚚

Aside from being a financial necessity for the down payment, bridge financing is an excellent strategy for your peace of mind.

• Take Your Time: Instead of moving out in the morning and moving in that afternoon (a logistical nightmare!), you can overlap your possession dates.

• Clean & Prep: You can move into the new house, then go back to the old empty house to clean it thoroughly before handing over the keys.

• Avoid the Hotel: No need to put your furniture in storage and stay in a hotel for a week between homes.

The Costs and The Fine Print 💰

Bridge financing is convenient, but it’s important to know the numbers. Because these loans are short-term, the structure is different from a standard mortgage.

• Interest Rates: These are usually adjustable rates tied to Prime. A typical rate is Prime + 2.00%. (Based on current rates, that puts you around 6.45%).

• Fees: Lenders typically charge a setup fee, usually around $250.

• Minimum Amount: The minimum bridge loan amount is generally $5,000.

• Maximum Duration: This is a temporary solution. Typically, a bridge loan can be carried for a maximum of 120 days.

Do You Qualify? The Requirements 📝

Not everyone automatically qualifies for a bridge loan. Because the lender is taking a risk by giving you money before your old house closes, they need to be 100% sure that the money is coming.

To get approved, you must provide copies of the Agreement of Purchase/Sale for both properties (the one you are selling and the one you are buying).

The lender will verify the following:

1. ✅ Binding Contracts: Both agreements must be signed and binding.

2. ✅ Conditions Removed: You cannot have pending inspection or financing conditions. The sale must be firm.

3. ✅ Equity Confirmation: A receipt of your existing mortgage statement to prove you have enough equity to cover the bridge loan.

Summary

Bridge financing is the secret weapon for a smooth transition between homes. It allows you to use your hard-earned equity to secure your new home without waiting for the final sale proceeds of your old one.

Are you looking to make a move but worried about the timeline? Let's chat about your options! 📞