Buying Before Selling? Bridge Financing May Help

Bridge financing may be worth considering when:

• You have purchased a new home before the sale of your current home closes.

• Your purchase and sale closing dates are different.

• You need access to the equity in your current home for the down payment on your new property.

• You want more flexibility when coordinating your move.

• You want to avoid making your purchase dependent on having the sale proceeds available first.

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Bridge financing is generally intended to solve a short-term timing gap rather than provide long-term borrowing.

In a typical bridge-financing situation, you have a firm sale agreement for your current home and a firm purchase agreement for your new home.

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The lender may provide short-term financing based on the equity that is expected to become available when your existing property sale closes.

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Once the sale of your current home is completed, the bridge loan is generally repaid from the sale proceeds.

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Because bridge financing is temporary, lenders usually require clear documentation confirming both the purchase and the sale.

Requirements vary by lender, but bridge financing commonly depends on factors such as:

• A firm purchase agreement for your new home

• A firm sale agreement for your existing home

• The equity available in your current property

• The amount of financing required

• The length of time between the two closing dates

• Your overall mortgage qualification

• The lender's bridge-financing policies

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Some lenders may also have limits on the maximum bridge period or the amount they are willing to advance.

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I'll help you understand the specific requirements that apply to your situation.

The amount of bridge financing available depends on your expected net proceeds from the sale of your current property and the lender's requirements.

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Lenders may consider factors such as:

• The sale price of your current property

• Your existing mortgage balance

• Real estate commissions

• Legal and closing costs

• Other amounts that must be paid from the sale proceeds

• The amount needed to complete your new purchase

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The goal is typically to bridge the amount you need temporarily until your sale proceeds become available.

Bridge financing is usually short term, but it is important to understand the costs involved.

Depending on the lender, costs may include:

• Interest on the bridge loan

• Administration or lender fees

• Legal fees

• Other lender-specific charges

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Because the financing is usually outstanding for a relatively short period, the total dollar cost may be more important than looking at the interest rate alone.

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I'll help you understand the expected cost before you decide whether bridge financing makes sense.

Bridge financing is not the only way to manage a move between two properties.

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Selling First

Selling your existing home before buying your next property may reduce financial uncertainty because you know exactly how much equity is available for your next purchase.

However, you may need temporary accommodation if the timing doesn't line up.

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Buying First with Bridge Financing

Buying first may give you more flexibility in choosing your next home, but you may temporarily have financial obligations related to both properties.

The right approach depends on your financial position, comfort level, market conditions, and timing.

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Check: Buying Your Next Home

Before moving forward, it's important to understand both the benefits and the risks.

Consider:

• How long the bridge period will be

• The expected proceeds from your home sale

• Your ability to carry both properties temporarily

• The cost of the bridge loan

• Whether your sale is firm

• Your existing mortgage terms

• Potential penalties or discharge costs

• Whether another financing strategy may be more appropriate

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Planning the timing carefully can help reduce surprises during your move.