Bridge Loans.

There are three typical situations when bridge loan mortgage financing may be helpful:

1) The existing property is listed for sale and sold firm to a buyer without conditions; bridge loan lenders have the highest degree of confidence that they’ll receive their money back as there is a firm sale with a tangible closing date. There is always a risk that the purchaser defaults on closing, but there is a lesser degree of calculated risk compared to the other following situations. For this reason, subject to underwriting requirements, traditional lenders provide the lowest available bridge loan rates. 

2) The existing property is listed for sale without a firm sale. Unlike the previous example where the property has sold firm, even if the propety is sold firm with conditions, in this situation, the property is only listed for sale. The reality is that a property can be listed for sale with a reasonable or unreasonable asking price. This situation provides less confidence to bridge loan lenders than in the previous situation, as there is no telling if and when the property will be sold with less assurance if and when the lender will receive their money back. 

3) The existing property is not listed for sale. In comparison to the previous two bridge loan examples, in this situation, a bridge loan lender has zero evidence that the property will sell, for what amount, but if the real estate owner will even list the property for sale. For this reason, this example provides bridge loan lenders with the least amount of confidence. This example is arguably more of a ‘blanket mortgage‘ or an ‘inter-alia mortgage’ whereby the mortgage lender will finance the purchase of another property and register their mortgage on the purchase property, and the property not listed for sale, in theory, it’s the same registration set-up as a bridge loan in the previous two examples, however, in this situation, the lender has no assurance that the property will even be listed for sale. If the property owner does not list their property for sale, the lender will ultimately have security over both properties. 

Depending on the client’s income and credit profile and the time between the purchase date and the sale closing date, a bride loan from a traditional bridge loan lender may not be possible. A private mortgage bridge loan may provide greater flexibility with less red tape. Contact DV Capital to discuss your bridge mortgage loan requirements in Ontario, British Columbia & Nova Scotia.