Bridge Financing in Langley

Bridge financing is a vital financial instrument that helps homeowners cover the deposit on their new home when they are yet to complete the sale of their existing property. In this article, we will discuss the ins and outs of bridge financing in Langley, eligibility criteria, costs involved, the duration of bridge loans, and the process of receiving and repaying them.

What is Bridge Financing?


Bridge financing is a short-term loan that allows homeowners to use the equity in their existing property to cover the deposit on their new home. The loan is repaid when the sale of the existing property is complete, effectively 'bridging the gap' between the two completion dates. This financial solution is particularly helpful for those who find themselves in the middle of buying and selling properties simultaneously.


How Bridge Financing Works


When you apply for a bridge loan, the lender assesses your existing property's equity and your ability to repay the loan upon the sale of the property. The loan is then registered against your existing property, providing the lender with security.


Purpose  of Bridge Financing


The primary purpose of bridge financing is to help homeowners cover the deposit on their new home without having to wait for the sale of their existing property. This ensures a smooth transition between properties and prevents potential financial strains.


Eligibility for Bridge Financing in Langley


To be eligible for bridge financing in Langley, you must meet the following criteria:

  • Have an approved mortgage for your new property
  • Have an accepted offer for your existing property
  • Demonstrate that the sale price of your existing property is sufficient to cover the bridge loan


Costs of Bridge Financing


There are three main costs involved in bridge financing:

  1. Lender fees: These fees are charged by the lender and typically range from $300 to $600.
  2. Interest rates: Bridge loan interest rates are based on the prime rate (currently 3.45%) plus a premium (2-5%). For example, a $200,000 bridge loan with a 2.5% premium (5.95% including prime) would incur an interest cost of $32.60 for each day it is required.
  3. Solicitor fees: Your solicitor will charge a fee (usually around $300) for contractually arranging the bridge loan registration against your existing property and ensuring its repayment.


Duration of Bridge Loans


Bridge loans generally last for a period of 30 to 60 days. However, exceptions can be made for extended periods based on the strength of the application.


Receiving and Repaying Bridge Loans


The process of receiving and repaying bridge loans is handled by your lawyer, broker, and lender, ensuring a hassle-free experience for you.


Availability of Bridge Financing through Lenders


While most lenders provide bridge financing, not all do. It is essential to consult with your broker to explore the available options and choose the best one for your situation.

Bridge Financing FAQ

  • What is bridge financing?

    Bridge financing allows you to use the equity in your existing home to cover the deposit on your new home. The loan is repaid when the sale of your existing property is complete, letting you’ bridge the gap’ between the two completion dates.


  • Am I eligible for bridge financing?

    Once you have had your mortgage approved, you are eligible for a bridge loan, as long as you also have an accepted offer for your existing property. Lenders will need to know that the sale price for your existing property is enough to cover the bridge loan.

  • What are the costs?

    There are three costs involved.

     

    1) Lender fees 

    This is charged by the lender and not us. These can be from $300-600. 

     

    2) Interest

    This is based on prime + premium. Prime is currently 3.45%, premiums can range from 2-5%. For a bridge of $200,000, with a premium of 2.5% (5.95% including prime), the interest would be $32.60 for each day it is required.

     

    3) Your solicitor will add a fee for contractually arranging to have the bridge loan registered against your existing property and for it to be repaid.

    This gives the lender security, knowing that they are going to be repaid. This fee is usually around $300.

  • How long can a bridge loan last?

    Bridge loans are generally limited to 30-60 days. It is possible for an exception to be made for extended periods based on the application strength.

  • How do I receive and repay the bridge loan?

    You don’t need to worry about these at all!

    All of the logistics are taken care of by your lawyer, broker, and lender.


  • Is bridge financing available through any lender?

    Most lenders are able to provide this service, but not all. We are able to offer bridge financing options to our clients.