What is Bridge Financing?
It is a useful tool made available to borrowers when the closing date of the home they are purchasing is before the closing date of the home they are selling. This is generally common in a seller’s market, buyers often explore the idea of making a firm offer without conditions, even if they have their own house to sell.
Bridge Financing means that 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. Basically, it is closing the gap between the two firm closing dates that do not coincide.
Bridge financing is not the same as being able to carry two separate properties.
However, bridge financing is not applicable if your home is not sold firm, you are talking about carrying two properties (owning two homes). Carrying is when the buyer owns two homes simultaneously for any length of time. They are also qualified to carry the total sum of the two mortgages.
So, what is required to set up bridge financing? Your lender will ask you for a copy of your firm purchase agreement and firm sale agreement.
This is a great stress reliever and helps with leaving a buffer of time for the buyers to get settled into their new home before their own purchasers will show up on their previous home’s doorstep looking for a clean and empty property. This also give the buyer some flexibility when it comes to accepting an offer on their own home, that firms
Bridge financing is quite common and a wonderful option but its a conditional on your own home have a firm offer in place.
When it comes down to it, you should make it clear with your lender whether you are looking to mortgage two homes or bridge the gap between 2 firm sales before you firm up your financing.