It’s the age-old question that homeowners often have when they want to sell their home and buy a new one: Should I buy or sell first? Sometimes you may not even have a choice, but if you do, which one should you choose? This is only one of many questions that homeowners often have about bridge financing – that one little area of home loans that people can never seem to wrap their heads around. So when the choice is yours, which way do you go? This, along with some of the other most commonly asked questions about bridge financing are listed below.
What is a bridge loan?
Even though the process and all the ins and outs of bridge financing may be complicated, bridge financing at its most basic is quite simple. When a seller closes on their new home before they’ve closed on their first home, and they still need money for their down payment, a bridge loan can step in and “bridge the gap” between the two. This gives the homeowner the money they need to make the transition from one home to another seamlessly.
How much can I get from a bridge loan?
The amount you receive for your bridge loan will depend on your own situation, what requirements you fill, and the lender you’re working with. Bridge loans though, are typically never as much as an Ottawa mortgage but rather, just give you enough so you can make the down payment.
What are the requirements for a bridge loan?
Again, every lender will have a different requirements for the bridge loans they hand out. Typically, they just want to make sure that the borrower can carry two loans at once, and that they’ll be able to pay it back. Credit score and payment history on the first mortgage are likely going to be the two biggest requirements for obtaining bridge financing.
Are bridge loans a second mortgage?
It’s easy to think they are, because you’re using it to buy a home and you already have a first mortgage in place. But no. Bridge loans do not rely on equity, and so they are not considered a second mortgage.
So should I buy or sell first?
Back to the question that started everything. A bridge loan won’t be able to tell you whether or not you should buy a new home or sell your old first. But, they can make the process of selling your home first much less stressful, and keep you secure in the knowledge that the funds will be there in case you need a down payment for the second.
