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Bridge loans help home owners bridge the gap between the sale of their current home and the purchase of their new home.
It’s a short-term loan that helps you cover the period of time between when you receive money from the sale of your current home, and when you need that money to pay for your down payment on your new home.
An alternative to a traditional mortgage is a bridge loan. If you are looking to purchase a new home or commercial property but have not been able to sell your current property in time, you may need to consider a bridge loan. A bridge loan is also known as a gap financing solution and can help you obtain funds for the down payment on your new property or home.
Bridge loans are typically short term loans that range from a few months up to one year. In other words your house has not sold in time to give you the funds to put a down payment on the new home or property you are purchasing. This is where a bridge loan can really help by using the equity in your current property or home as collateral for a loan to put towards the purchase of your new commercial property or new home.
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We provide a range of mortgage products to fit your individual needs.
At Orchid Financing, we offer a range of solutions for all your home mortgage needs. Whether you're looking to buy a new home or refinance an existing one, we'll help you find the loan that works best for you.
What information do you need to know about bridge loans?
How much money can you get with a bridge loan?
Lenders will need to evaluate a borrower’s specific situation in order to give a borrower a maximum loan amount. Based on this information, the lender will also determine how much time the borrower will have to pay the loan back. In some circumstances you can opt for a longer term or higher amount of bridge loan. If more time or money is needed, the lender will need to consider various factors in order to decide if you qualify. Keep in mind for larger and longer loans a lien may need to be registered on your property. A qualified mortgage agent can help you determine the best course of action to take, and find the right lender for your specific needs and situation.
What are the additional fees?
As with any loan, a bridge loan has interest. The interest on a bridge loan is generally similar to the prime rate plus 2%. Bridge loans are typically issued over a short period of time and are repaid when the equity of your previous home or commercial property is collected after the sale closes. If you need a loan in excess of $200,000, it may be necessary to register a lien on your property; then, when you pay back the loan and want to remove the lien, you will need to hire a real estate lawyer.
How do you qualify for a bridge loan?
To apply for a bridge loan, you will need to provide the lender with a copy of the original purchase agreement for your new commercial investment or new home, and a copy of the sale agreement for your current property. However, if your closing date is not firm—meaning that you have not yet received approval from the seller to purchase their property, or the seller has not yet accepted your offer to buy—then you will need to turn to a private lender because most banks and traditional lenders will require a firm closing date in order to approve you for a bridge loan.
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FAQ
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What is a bridge loan in Canada?
A bridge loan in Canada is a short-term financing solution that helps cover the gap between buying a new property and selling your existing home. It provides temporary funds so you can move forward without delays.
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When should I use a bridge loan?
You may need a bridge loan for home purchase if your new home closes before your current property is sold. It ensures you have access to funds during the transition period.
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How does a bridge loan work?
A bridge mortgage loan uses the equity in your current home as security. Once your existing property is sold, the loan is repaid in full.
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How long can I have a bridge loan?
Most bridge loans in Canada are short-term, typically lasting from a few weeks up to 12 months, depending on your situation and lender.
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What are the interest rates on bridge loans?
Bridge loan rates in Canada are usually higher than standard mortgage rates due to their short-term nature, but they provide flexibility and convenience during the transition.
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Do I qualify for a bridge loan?
To qualify for a bridge loan in Canada, you generally need a firm sale agreement on your current home and a confirmed purchase of your new property.
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Can I get a bridge loan with bad credit?
In some cases, yes. There are bridge loan options for bad credit in Canada through alternative and private lenders, depending on your home equity and overall profile.
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Why work with a mortgage broker for a bridge loan?
A mortgage broker in Canada can connect you with multiple lenders, secure competitive bridge financing options, and ensure a smooth transition between properties.