How can Bridge-Financing Fill the Gap Between Home Closing and Buying?
You have just found the home of your dreams and can’t wait to make an offer but you still have your own home to sell. There are options as to what you can do so that you don’t miss out on this opportunity, depending on your situation.
What is Bridge-Financing
One of those options is called bridge financing, and it is useful when a person needs funds to close the deal on a new home but have not closed the sale on their current home. This option can be expensive if you are not in a position of having a lot of money saved but can also be worth it as a short-term solution. Bridge financing usually carries a higher borrowing rate than your traditional mortgage (ex. prime + 1 or 2%). But remember, this loan should be paid in full in only a few days or weeks which means your expenses could range from hundreds to a couple of thousand dollars depending on the amount borrowed.
Not all banks allow for bridge financing and you should check into this before adding this to your options. If this sounds like an option you can afford, you should also keep in mind the costs of having to carry two mortgages, property taxes, home insurance and utilities on both properties as well as the temporary bridge loan. The only problem that could arise in this situation is if the sale of your house falls through and you have to deal with all of these expenses on a long-term basis.
With all of this in mind, bridge financing can still be the best way to deal with two different closings that don’t match up. If this is something that might work for you please contact us so that we can help you make that decision or find an option that will work for you.