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Bridge Financing

When you're buying a new home and selling your current one, it can be tricky to get the timing just right. For instance, perhaps you found your dream home, but the sale on your current home hasn't closed yet—and you're wondering what to do next. That's where bridge financing comes in. Find out how bridge financing works and when it may be the right choice for you.

What is bridge financing?

Bridge financing, also called a bridge loan, is a way to help bridge the gap between closing on your current house and your new place because it allows you to carry the mortgage on two properties for a specified amount of time, typically a maximum of 90 days.

So how does bridge financing work? These short-term loans use your current home’s equity to cover some of the costs of your new home, like the down payment. That way, you don't have to miss out on your dream home while waiting on your current house to close.

What are the pros and cons of bridge financing?

Like with every financial decision, there are advantages and disadvantages of bridge financing loans. It's a good idea to talk to a Mortgage Specialist about your own unique situation. In the meantime, here are a few things you should know:

  • Pros of bridge financing

    • Financial Flexibility. You may be able to use the home equity in your current home to help purchase your dream home before someone else swoops in.
    • Time. You don’t have to stress about the sale closing on your current home before you close on your new home.

  • Cons of bridge financing

    • Interest. Although they are short-term, bridge loans have interest rates similar to open rate mortgages, which are often higher than the interest rate you may be used to paying with your current mortgage.
    • Cost. If for some reason your sales agreement falls through on your current house, you may have to pay two mortgages until a new sale is finalized.

How is the amount of a bridge loan calculated?

Let’s say your closing date for your new home is in 30 days, but you expect to close on your existing home in 90 days. A bridge loan will cover the 60 days in between.

Here's how: If your current home is worth $300,000 and you owe $200,000 on your mortgage, you may be eligible for a $100,000 bridge loan. (Keep in mind that the amount of your bridge loan will be reduced by an estimated amount for closing costs as well.) Once your current home sells, that equity is used to repay your bridge loan.

To qualify for bridge financing, you'll need:

  1. A copy of the Sale Agreement for the home you're selling and the Purchase Agreement for the home you're buying.

  2. You must be approved for a TD Canada Trust Mortgage or TD Home Equity FlexLine on the new property to qualify for a bridge loan.

What if you need a larger loan or a bridge loan beyond 90 days? Our Mortgage Specialists can help explain your options.

Is bridge financing right for you?

Like your home buying situation, your home financing needs are unique. Here are some tips to help you decide:

  1. You’ve found the perfect place and want to act. Say you’ve found a new place before your current home sale closes. You don’t have to let your dream home slip away. With bridge financing, you can be empowered to make an offer when you’re ready.

  2. You can’t afford a down payment without the money from your current home. When you’re selling a home, timing doesn’t always work out perfectly. If you need some extra cash to make a down payment on your new home, bridge financing can help cover the difference until the sale closes on your current place.

  3. You want time between closing dates. Maybe you want to move into your new home before your current home closes, for instance, to do some renovations. In that case, bridge financing may be an option to consider.

We're ready to help you move forward

At TD, we want to help you be prepared for whatever the home buying process throws your way, whether its bridge financing or something else. Chat with one of our Mortgage Specialists who are ready to answer any questions you may have, so you can feel good about your next move.

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