{"id":18902,"date":"2021-11-16T11:11:00","date_gmt":"2021-11-16T19:11:00","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=18902"},"modified":"2021-11-11T14:36:39","modified_gmt":"2021-11-11T22:36:39","slug":"how-to-calculate-bridge-financing","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2021\/11\/how-to-calculate-bridge-financing\/","title":{"rendered":"How to Calculate Bridge Financing?"},"content":{"rendered":"<p style=\"text-align: justify;\"><strong>What is Bridge Financing?<\/strong><\/p>\n<p style=\"text-align: justify;\">When selling your home and buying another, there are situations when your purchase closing date is before your selling closing date, meaning you may not have available equity for your down payment. During this period of time, you\u2019ll have two mortgages\u2014your outgoing mortgage and your new mortgage\u2014as well as bridge financing.<\/p>\n<p style=\"text-align: justify;\">Also called a bridge loan, bridge financing is to help people who need to borrow to pay their down payment, and make it through the interim double mortgage period between two homes. The large financial institutions\u2014TD, Scotiabank, RBC, BMO, and CIBC\u2014all offer bridge financing, whereas smaller lenders may not have the resources. Ask your mortgage broker for all options.<\/p>\n<p style=\"text-align: justify;\"><strong>How Much Bridge Financing Can I Borrow?<\/strong><\/p>\n<p style=\"text-align: justify;\">Depending on your equity and personal needs, lenders are typically comfortable with lending up to $200,000 for 30 days, although some lenders will lend for up to 4 months. You can speak with your lender if you need more or have special requests and they\u2019ll evaluate your situation.<\/p>\n<p style=\"text-align: justify;\">Larger amounts could be approved on an exception basis, if your lender secures it against your property. This increases the cost of the bridge loan due to legal and administrative fees.<\/p>\n<p style=\"text-align: justify;\"><strong>How Lenders Calculate Bridge Financing<\/strong><\/p>\n<p style=\"text-align: justify;\">Bridge financing is largely dependent on the equity in the house you\u2019re selling. If you have $150,000 of equity in your current home, lenders will use that number as a starting point to calculate your eligible amount.<\/p>\n<p style=\"text-align: justify;\">In determining the maximum bridge loan you can qualify for, they will typically deduct up to 7% from your home equity amount: 5% for your real estate agent commissions on your home purchase and home sale, and up to 2% for other expenses.<\/p>\n<p style=\"text-align: justify;\">Because bridge financing is used to pay your down payment, an easy way to determine the amount of bridge financing you need is to subtract your deposit from your down payment. If you need a down payment of $120,000 and you\u2019ve put a deposit down of $20,000, you need $100,000. There may be other costs you need to cover beyond your down payment, so speaking to your lender is your best course of action.<\/p>\n<p style=\"text-align: justify;\"><strong>Example<\/strong><\/p>\n<p style=\"text-align: justify;\">You\u2019re selling your house for $500,000 and have a current mortgage balance of $300,000, meaning you have $200,000 in equity. You\u2019re purchasing a home for $1,000,000. Your purchase closing date is May 31 and your existing home doesn\u2019t close until July 20.<\/p>\n<p style=\"text-align: justify;\">First, let\u2019s determine the maximum bridge financing you can qualify for :<\/p>\n<p style=\"text-align: justify;\">Your current home sale price $500,000<br \/>\nSubtract your current mortgage balance -$300,000<br \/>\nTotal equity $200,000<\/p>\n<p style=\"text-align: justify;\">Deduct 7% for agent commissions and other expenses: $200,000 \u2013 7% ($14,000) = $186,000<\/p>\n<p style=\"text-align: justify;\">Therefore, in this example, you\u2019re eligible for $186,000 of bridge financing.<\/p>\n<p style=\"text-align: justify;\">Next, let\u2019s find out how much bridge financing you\u2019ll need :<\/p>\n<p style=\"text-align: justify;\">Desired down payment $200,000 (20% of new home price)<br \/>\nSubtract deposit -$30,000<br \/>\nTotal bridge financing needed $170,000<\/p>\n<p style=\"text-align: justify;\">Therefore, because you\u2019re eligible for $186,000 in this scenario but only need $170,000, you should be approved for your desired bridge financing.<\/p>\n<p style=\"text-align: justify;\">Between May 31 and July 20, you\u2019ll have two mortgages and bridge financing :<\/p>\n<p style=\"text-align: justify;\">Outgoing mortgage $300,000<br \/>\nBridge financing $170,000<br \/>\nNew mortgage $800,000<\/p>\n<p style=\"text-align: justify;\">On July 20, your outgoing mortgage and your bridge loan both dissolve and you\u2019re left your new mortgage.<\/p>\n<p style=\"text-align: justify;\"><strong>Bridge financing fees<\/strong><\/p>\n<p style=\"text-align: justify;\">Bridge loans are subject to interest, like any credit product. The interest rate will be higher than your mortgage rate\u2014typically up to Prime + 3%. The loan is for a short period of time, until you can repay the loan using equity from your previous home. There are also administration fees, typically around $500.<\/p>\n<p style=\"text-align: justify;\">To qualify for bridge financing, you\u2019ll need a copy of the sale agreement for your previous home and the purchase agreement for your new home. The bank evaluates the risk that your sale agreement will not go through before approving your bridge loan.<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.zoocasa.com\/blog\/bridge-financing\/\" target=\"_blank\" rel=\"noopener\">Bridge Financing : What Is It and How Does It Work?<\/a> by zoocasa<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is Bridge Financing? When selling your home and buying another, there are situations when your purchase closing date is before your selling closing date, meaning you may not have &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2021\/11\/how-to-calculate-bridge-financing\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-18902","post","type-post","status-publish","format-standard","hentry","category-mortgage"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How to Calculate Bridge Financing? &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2021\/11\/how-to-calculate-bridge-financing\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"How to Calculate Bridge Financing? &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"What is Bridge Financing? 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