Published: August 13, 2013 • Last updated: June 17, 2020 at 17:45 pm
Need to sell before you close on your new home? A bridge mortgage may be the solution!
I’ve noticed the need for bridge mortgages has increased over the past year. The need arises when the sale of your home closes sometime after the day your purchase closes. In most cases you will already know your home has been sold, and all conditions waived, however the closing dates are not the same.
Bridge mortgages are a terrific financial product – they don’t cost much to set up or administer, and their carrying costs are quite reasonable. But the convenience of bridging those two dates is amazing. What’s changed in my clientele is more people are deliberately choosing non synchronous closing dates – thus creating the need for bridge financing even if it did not appear necessary.
Many home buyers twist themselves in knots trying to ensure their purchase date and sale date are one and the same. And that is no easy feat. It’s prudent to sell first, then know how much time you have to find your new home.
Those who try to buy first are at risk of making a wishy-washy offer, conditional on the sale of their own home. Risk takers might presume their home will sell easily, and will not insert such a condition when they buy their next home; especially if they are buying in a hot market because sellers expect very few conditions in those circumstances.
These days I see more home buyers deliberately choosing their sale closing date after their purchase closing date. This allows for a more leisurely move to their new home, and extra time to renovate or refresh the home they are buying while it is empty.
Mortgage lenders have no incentive to offer bridge mortgages
Not all mortgage lenders offer bridge financing, so it is important you know up front if yours does. And for the branch personnel who have to set it up, it’s not fun, and no lender gets rich from bridge financing. You have almost no chance of being approved for a bridge mortgage if you are not using that same mortgage agent or lender to provide you mortgage financing after your sale closes.
When it’s time for a new mortgage, some people shop the market rigorously for the lowest possible interest rate, pitting lenders in a form of bidding war to secure their business. But if they find they also need a bridge mortgage when the dust settles, they may find the institution which has faithfully serviced their needs for decades may turn away from their request for a bridge loan.
It’s because they have been given no incentive to comply. Someone else has won the mortgage business. The argument consumers make about customer loyalty cuts both ways after all.