Mortgage Glossary

BRIDGE FINANCING

This is short term financing to bridge the time gap between when you have to pay the balance of money for your new home, and the date you receive funds for the sale of your present home.

For example:
You have purchased a new house for $150,000 with a closing date of August 31st.
You sell your house for $150,000 with a closing date of September 30th.

You need to pay for your new house one month earlier than you will receive the money from your old house. You may need to set up interim financing.
No financial institution likes to lend money for a short period of time, it costs them too much in computer time and staff costs. If you are in this situation, you can expect to pay a high interest rate and a fee of several hundreds (or thousands) of dollars to get this money.

If you can change those closing dates, you will save a lot of money!

Buying before you have negotiated a sale on your current home is a very risky proposition. Only consider it if you can afford the payments on both homes for an extended period of time, and you have enough equity to accomplish this.

If you find the 'perfect' home and you don't want to risk losing it with a 'subject to the sale of...' clause, you may want to explore an 'option to purchase' with your realtor or lawyer.

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