Bridging the gap


I have a lot of clients who are moving up and selling the starter home they own in order to buy a larger home. Most of the time, they have these transactions occur on the same day: sell in the morning, buy in the afternoon, spend the weekend moving in. But what happens if your sale doesn’t close on time?

It’s not uncommon for a sale to take all day closing. Maybe the buyer’s lender didn’t get the money to the lawyer very early; maybe the buyer needs to sell a house, too. Whatever the reason, it can sometimes be after 4:00 pm before a sale closes, and in Ontario, the latest a transaction can close and be registered is 5:00 pm, which does not leave much time to complete your purchase. The last thing you want is for your sale to close at the end of the day, leaving you with nowhere to go over the weekend. There is a relatively easy way around this situation, though, called bridge financing.

Bridging is when you borrow against the equity in your home ahead of your sale. Say, for example, that you were planning on using $50,000.00 in equity from your home as your down payment on your new home. The lender you are getting your new mortgage with could lend you that $50,000.00 at the time of your purchase, and then be paid back at the time of your sale. You can have an extra day, an extra week, an extra month or even a few extra hours – it is possible to do a same-day bridge, so that your purchase can close right away in the morning, and then you won’t be stressed about the timing of the sale. If you qualify for a bridge loan, the interest that you will pay is far outweighed by the stress you will avoid by trying to purchase and sell on the same day. If you are moving from one house to another, you should definitely talk to your mortgage broker about the option of bridging.