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What is a bridge loan?
Need a Bridge Loan?
A bridge loan is a short-term mortgage facility typically used to purchase real estate that has a closing date before the closing date of another property, that contains your down payment. A bridge loan will provide you with the ability to essentially access the equity in the property that is either not yet listed for sale, listed for sale without a firm closing date, or sold with a firm closing date. That’s right – a bridge loan will allow you to close on your new purchase, before the sale of your current property. Whether you are in the middle of a heated real estate market or have your eye set on a particular property, a bridge loan will help you execute with greater peace of mind. At DV Capital we take the stress out of the bridge loan mortgage process.Â
How does a bridge loan work?
Bridge loan Mortgage.
A bridge loan mortgage is just that – a bridge from from point A to point B. You might benefit from a bridge loan if you are purchasing a property that is set to close before the sale of your existing property, the property that contains your down payment and closing cost funds. In some cases, bridge financing is referred to as a ‘blanket mortgage‘ in the sense that one mortgage is registered, or blanketed, against multiple properties. This blanket structure provides the mortgage lender with sufficient collateral against both properties, given the fact that a bridge loan is typically registered for up to 100% of the purchase price or appraised value of the purchase property. A bridge loan lender will assess the aggregate equity, or the inter-alia equity, between both properties to ascertain their comfort with providing an approval for a bridge loan. DV Capital provides bridge loans to home owners, real estate investors and builders across Ontario, British Columbia and Nova Scotia. Contact us to learn more!Â
bridge loan example.
Bridge Financing Without Firm Offer.
As alluded to earlier in our examples of bridge financing mortgages, say that you currently own a home in Toronto, Ontario, recently appraised for $1,000,000, with a $350,000 mortgage. You’ve found your next home in King City, Ontario and submitted an offer to purchase for $850,000, which was accepted by the seller. You have either not yet listed your Toronto home, or have listed your Toronto home and not receiving adequate offers, or have sold firm with a closing date that will fall past the closing date of your new King City, Ontario home purchase. In other words, your down payment is ‘tied-up’ in the equity of your Toronto home. You are now asking yourself how it will be possible to close on the purchase of your $850,000, when you have already deposited $50,000, for example, and the remaining cash-on-hand that you have available will be for land transfer tax and closing costs, thus, you are short approximately $800,000. With a DV Capital bridge loan, you may qualify to receive a 1st mortgage of $800,000 registered against the $850,000 property on the day of closing (before the sale of your Toronto home that contains the down payment). This mortgage would also be registered, or ‘blanketed’ in 2nd position, behind the $350,000 1st mortgage, against your Toronto, Ontario home, until such time the Toronto, Ontario property sells, and the loan proceeds will be used to pay-down the bridge loan.
when to use a bridge loan.
Solutions for all.
Oftentimes a bridge loan is used to help a real estate purchaser close on a new purchase, before the sale of their existing property that contains their down payment. A bridge loan may be used when the property you are selling has a closing date after the purchase price of the property you are purchasing. Furthermore, a bridge loan may help you with timing to renovate your existing property or market your property, granting you time and preventing you from selling or accepting a less than ideal offer. A bridge loan may also be useful for real estate investors who are looking to expand their real estate investment portfolio by purchasing new properties without using cash, rather using existing equity from currently owned properties by way of a blanket mortgage. A bridge mortgage loan is essentially a shot term financing facility until such time a longterm traditional financing vehicle comes to fruition. DV Capital provides bridge financing across Ontario, British Columbia and Nova Scotia.
Bridge Loan Mortgage Lenders.
Options are a Great thing.
The reality is that most traditional mortgage lenders require your existing property to have a firm sale; this is usually easier said than done. When this is the case, DV Capital will be pleased to assist you obtain a bridge loan – traditional bridge loans are typically priced a couple of points over prime. For clients that cannot fit into the traditional bridge lending box, the good news it that a DV Capital private mortgage bridge loan does NOT require a firm sale, and in most cases, does not even require your current property to even be listed on the market. DV Capital makes bridge loan financing easy and stress-free and enables maneuvering not easily obtained by traditional mortgage lenders.Â
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