Getting Bridge Loan When You Have Great Assets and No Need For Mortgage Can Be Problematic
Dear Ross: We finally decided to sell the family home in Markham and move to a waterfront condo near Oakville, Ontario. It just didn’t make sense to maintain a four bedroom house, when it’s just the two of us. Our purchase closing date is September 6th, but our house will not sell till September 27th. We don’t currently have a mortgage and we won’t need one after we move in. But we do need money to bridge the two transactions. Will this be a problem?
Surprisingly this won’t be straightforward. You’d think lenders would be lining up to help this couple. They have a husky net worth, no debts, amazing credit histories, and are buying a desirable property. But, they don’t need a mortgage, so whoever offers them a bridge loan for three weeks is going to process a lot of paperwork for very little return.
There is little a mortgage agent can offer in this scenario, so my advice was to approach their preferred bank and ask. But I warned them the answer would probably be no, and they should be prepared to offer their bank an incentive. I suggested they ask their bank to set up a Home Equity Line of Credit (HELOC) on the new condo, even though they anticipated no use for one. This would make the bridge loan more worthwhile for the bank.
I pointed out their bank would probably not charge them any set up or appraisal fees for the HELOC, and there should be no need for their own lawyer, so basically it would be free. That said, why would they not accept this – especially if they go from being persona non-grata to a desirable client in one fell swoop.
Sure enough, things played out exactly this way. Their problem has been solved. A bridge mortgage will be done and after all is said and done, this couple will have a HELOC on their condo – just in case.