Kim Mullan Blog
Bridge Financing. Why You Need to Understand the Language.
March 4th 2018
In a Seller's market, Buyers often explore the idea of making a firm offer without conditions even if they have a house to sell.
If you are thinking of buying before selling, a common consideration in a Sellers market when Sellers aren't likely to consider many, if any, conditions, you need to plan ahead in case your own home hasn't sold by closing.
Buyers often explore options during a conditional period where there are contingencies on financing approval or prior to making an offer so they know their negotiating strength.
BRIDGE financing is NOT the same as being able to CARRY two properties.
Carrying two properties means the buyer can OWN 2 homes simultaneously for any length of time. They are qualified to carry the total sum of the two mortgages.
Bridge Financing is entirely different. It means the lender is comfortable making an interim loan between the closing date of the new purchase and the closing date of the buyer's own FIRM SALE.
It is bridging the gap between 2 firm closing dates that do not coincide.
This is a great stress reliever and can provide a buffer of time for buyers to get settled into their new home before their own purchasers show up on the doorstep of their previous house looking for a clean, empty property to step into.
It also provides some flexibility for the Buyer to accept an offer on their own home that firms up with a different closing date then the home they themselves are purchasing.
The lender is looking for the FIRM SALE of your own home and providing an interim loan until you receive the money from your own buyers.
If your property is not sold firm you aren't talking about a Bridge Loan. You are talking about carrying two properties...owning two homes.
Bridge Financing is quite common and a wonderful option but it's conditional on your own home have a firm offer in place.
Make sure you are clear with your lender whether you are looking to mortgage two homes or bridge the gap between 2 firm sales before you firm up financing.