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What if one day you pass by a house that looks exactly like what you have always been dreaming of? To top it all, it is situated in an accessible place and surrounded by a vibrant community. Then, you learn that the house is for sale. You wanted to buy it right then and there, but you still think of the financial repercussion you might incur. In this situation, you do not have to overthink about your decisions anymore. The most practical solution is to get a bridge mortgage.
From the name itself, a bridge mortgage “bridges” the gap between your newly purchased home and your old home that’s waiting to be sold. This type of mortgage runs for a short term only. Sometimes as short as 90 days and can only be extended up to one year.
What are the benefits of a bridge mortgage?
Just like all the other types of mortgages, a bridge mortgage could really be beneficial once used strategically. One great benefit of a bridge mortgage is that it allows you to take the equity of your old home and use it to buy a new home. Most individuals take advantage of this and use this as a strategy when the closing dates for the sale of their old home and the purchase of their new home don’t coincide.
They say the best time to get a bridge mortgage is when other potential homebuyers are willing to wage bidding wars for the house that you have been eyeing. When you know that the house is such a blockbuster hit in the market, you can secure your purchase through a bridge mortgage.
When you have been turned down by a bank, you can still get a bridge mortgage financing through private mortgage lenders. This is beneficial on your part since most private lenders do not require you to submit tons of documents and requirements for a bridge mortgage. Once you are approved, all you need to do is to make your payments on time. In this way, you can also slowly rebuild your credit during the entire period of your bridge loan.
In addition, bridge mortgages can be utilized not just in purchasing a new home. You can also to use it to finance your home renovation, repair, or any other home improvements you have in mind.
What are the disadvantages of a bridge loan?
Bridge financing is different from the traditional mortgages we usually apply for. This type of mortgage is considered a higher-risk mortgage. Because of this, interest rates are usually higher compared to the traditional mortgage.
Another disadvantage of a bridge mortgage could be caused by its short loan period. Since it considered as a short-term loan, you don’t have an assurance that you can immediately find a buyer for your old house. You have to pressure yourself to quickly sell because if you don’t, all your debts will just pile up. You will end up drowning in debt and ruining your credit once you can’t handle all payments for your mortgages.
How can I get a bridge mortgage?
If you reside in Ontario, most private mortgage lenders only ask for the firm sales agreement of your current or old home and a firm purchase agreement for your new home. Since that is only the required document, this mortgage is appealing to potential homebuyers. However, before you make that deal, make sure to consult financial experts, private mortgage advisors, or mortgage brokers who have handled cases on bridge financing. They can assess and determine if you are eligible for this type of mortgage.
To be perfectly at peace and at ease with your decision, contact Private Mortgage Canada today! We’re excited to secure your new home for you.