If you want to buy a home but you don’t have the money right now, a bridge mortgage might be able to help. If you’re in the process of selling your current home, but you need the money now to buy your new home, a bridge loan could bridge the gaps in financing – it can cost you big though! Here we’re going to talk about the consequences of bridge loans, the benefits, and how to figure out if this is the best choice for you and your financial future. After all, if things aren’t going to work out, you may as well know before you sign on the dotted line.
Why Do They Call It a Bridge Mortgage?
This kind of financing builds a bridge from the financing that you have (your down payment, monies from your old home) and the financing that you need to buy your next home (the mortgage that you’re getting from your lender, loans, etc.) Sometimes you just don’t have enough money to do it on your own – and sometimes your mortgage lender refuses to give you any more money. If you’re in a jam, bridge loans can be helpful. You’re going to want to be very careful with this type of financing: these are high interest, short-term, expensive mortgages to take out. They’re nothing like the first or second mortgage and taken it on your home. They’re designed to be repaid in a few months.
Why Are They so Expensive?
They’re expensive because they can be. It’s all about supply and demand, if the supply of money is low and the demand for it as high, they can charge whatever they want. Some people pay 40% interest or more just so they can make sure they get their home closed in time. Sometimes it’s just better to work with a Canada mortgage broker instead; they may be able to help you find the right mortgage instead of trying to play catch-up with a bridge mortgage.
Interest Is a Killer
You want to shoot for the lowest interest rate on your mortgage – every point of interest is hundreds of dollars down the drain. Working with a mortgage broker or your loan officer to get your interest rate down as far as you can is the best thing you could do. If you’re still having trouble, or that it’s projected that you can’t pay this off, you might want to think about getting a different mortgage instead.
Think about Getting a Different Mortgage
When all else fails, you can always look into getting a different sort of mortgage. The thing about these kinds of mortgages is that the interest is so high, it’s almost like it’s been designed to fail. Try to go back to your mortgage lender, and see if they can give you more money on your original mortgage, anything that you keep you away from getting a bridge mortgage. If they won’t work with you, find a mortgage broker that will.
Erin Thompson is a mortgage broker and financial blogger for Homebase Mortgages. HBM is a Toronto mortgage broker that provides bridge mortgages, mortgages for the self-employed, home equity loans and lines of credit, debt consolidation, private mortgage lending and second mortgages. You can visit their website at http://www.homebasemortgages.ca/