Bridge Financing

What is Bridge Financing? Do You Need Bridge Financing?

Bridge financing is an important topic to discuss with your mortgage professional. If you’re moving from one house to another, there’s a good chance you’ll want to consider having bridge financing in place.

Imagine you’re selling your home in South Lethbridge and planning to move to West Lethbridge. You receive an accepted offer on your South Lethbridge home, with a possession date of May 30th. (buying and selling at the same time)

If the possession date for your new house in West Lethbridge is also May 30th, you’ll need to completely move out of your South Lethbridge home before noon that day (ideally earlier) and move everything into your West Lethbridge home. Some people manage this by using trailers or storage containers. This way, you don’t own more than one house at a time.

But what if your new house in West Lethbridge requires some updates, like painting or new flooring? Or you just don’t want the hassle of moving out and moving in on one day? You might prefer to take possession earlier, say on May 1st, to give yourself time to complete the work before moving in. This means that for the entire month of May, you’ll own two houses. During this time, you’ll need to cover the costs for both properties, including insurance, property taxes, utilities, and mortgage payments.

This is where bridge financing comes in. A bridge loan allows the bank to lend you the funds to own two houses at the same time.

Keep in mind that there may be additional costs involved. Your lawyer might charge a higher fee to handle the bridge loan, and your lender will likely have associated fees as well. However, for most people, the convenience of having time to prepare their new home before moving in is worth the added expense.

If you’re buying and selling simultaneously, make sure to let both your REALTOR® and lender know if you’re interested in bridge financing. Planning ahead can make your move much smoother!