How Hard is it to Qualify for a Bridge Mortgage?
If you’re having trouble meeting your financing needs to buy a new home, a bridge mortgage can help – but are you going to be able to qualify for one?
Here we’re going to go over everything that you need to know to make sure you’re meeting your financing goals and if bridge loans are really right for you. Remember: you’ll have to be in the process of selling one home that you already own and trying to buy another before you can qualify for this kind of mortgage. It’s not for people that are trying to buy a home for the first time!
What is a Bridge Mortgage?
The first question most borrowers have is: what is a bridge mortgage? Think of the bridge mortgage is something that builds a little bridge across the financing that you have right now, the financing that you need, and the financing that you’ll have. Everybody needs a little help every now and then, and when you’re in the process of selling one home and buying another a bridge mortgage can help you. Remember: if you’re not in the process of selling a home of buying another, you won’t be able to qualify for this kind of financing. You’ll need that collateral from the first home to get bridge financing.
How Does it Work?
When it comes to bridge mortgages you’re going to be using your equity as collateral. You’ll already have to have one home that’s completely paid off or you have a majority stake of equity in. You’ll have to be buying a new home; so if you’re trying to sell your old home to make enough money to buy the new one, bridge loans can help. They’ll be able to help you get just enough money to close on your new home or you wait for the money from the old one to come through.
Isn’t that Risky?
Yes, this can be very risky. You’ll technically be holding three mortgages all with one time. If you can’t pay off the bridge mortgage when you’re liquid, or you just don’t become liquid, you could stand to lose your first home, your new home, and everything in between. You shouldn’t enter into this kind of an arrangement lightly – you need to know everything you can before you do this. This is one of those situations where you want to look out for your own best interests.
Can You Afford One?
If you can’t afford a bridge mortgage right now, you may want to wait. There’s no shame in admitting that you can’t afford this – most people can’t! If you know for sure when your first home be sold, and you know that you have the money to pay this back, and then it’s a good idea. Just keep in mind that buyers can back out at the last second – until the home is closed on, you’re not out of the woods.
Homebase Mortgages is a leading Toronto mortgage broker, which specializes in all types of mortgages ranging from home equity loans, second mortgages, private mortgages, mortgage refinancing, mortgage renewals, home mortgages and hard money lending.
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