Bridge financing is a short-term solution that can help you access equity from your existing property to put towards the down payment of your new home. This type of financing is especially useful when you need to bridge the financial gap between the firm sale of your current home and the firm commitment to purchasing your new home.

Bridge loans typically range from 30 days to 1 year, with an average of six months in length. To be eligible for a bridge loan, you must have a firm sale agreement in place on your existing home, meaning all subjects have been removed. You will also require a purchase agreement for the new home to verify the amount required.

It is important to note that if you have not yet sold your home, you will not be eligible for bridge financing, as the lender needs that to accurately calculate how much equity you have available and if you can afford your new home. If you are currently looking to sell, or are in the midst of selling your home and considering bridge financing, it is important to understand that unless you can qualify and pay for two mortgages, you should always sell your existing home before purchasing a new one.

If you have sold your existing home but the closing date comes after the closing date of the new property you just purchased, then bridge financing will likely be your best option. However, it is important to consider whether or not you think you need bridge financing, as not all lenders provide this option. I can help you find a lender that provides the options you need.

It is also important to mention that bridge financing typically costs more than your traditional mortgage. Expect the Prime Rate plus 2, 3, or 4 percent, as well as an administration fee. In some cases, if you require a loan over $200,000 or a loan for more than 120 days, your lender may register a lien on the property until the loan is repaid. To remove this lien, you will need to consider the added costs of paying for a real estate lawyer.

If you have purchased your new home and are closing the deal, but your existing home has not yet sold, you would not qualify for bridge financing and would therefore need to consider a private loan. Private financing is expensive, but it is generally a more affordable option versus lowering the asking price of your existing home and losing out on tens of thousands just to sell quickly.

Private loans are dependent on having enough equity in your current property to qualify and are more expensive than traditional mortgages, with interest rates averaging anywhere from 7-15 percent. The costs associated with a higher interest rate are in addition to an up-front lender fee and potential broker fee. These amounts will vary based on your specific situation with consideration to: time required for the loan, the loan amount, loan-to-value ratio, credit bureau, property location, etc.

In conclusion, when it comes to bridge financing and selling and buying your home, seeking out a specialized mortgage broker (ahem me!) who can help you navigate the process and find the best options available to you can save you time and money. Remember, bridge financing is a short-term solution, so it is important to have a clear understanding of the costs and requirements associated with this type of financing before making any decisions.

Top 8 Questions About Reverse Mortgages.

Written by Mich Sneddon, CPA, CA – Reverse Mortgage Pros

Having completed dozens of reverse mortgage deals, there are some questions that I find I get over and over again.
So today I thought I’d write a piece on the 8 most common reverse mortgage questions that people in Canada have regarding reverse mortgages.

1. if i have an existing mortgage on the property, can i get a reverse mortgage?

Not only is this the most common question regarding reverse mortgages, it is actually one of the most common uses for a reverse mortgage – to pay off the current mortgage and eliminate that payment and help with monthly cash flow. However, it is important to realize that you would need to qualify for enough to pay that existing mortgage in full.

For example: If you have $70,000 remaining on the mortgage, you would need to qualify for at least $70,000 to be eligible for a reverse mortgage. If you owe $70,000 and qualify for $100,000 in reverse mortgage funds, the $70,000 would be paid first and you would be left with the remaining $30,000.

The good news is that the reverse mortgage funds can also be used to pay any penalties or charges for paying out your mortgage as well. However, the existing mortgage must always be paid off using the reverse mortgage funds and you get to keep whatever is left. Essentially, you are swapping your mortgage with a reverse mortgage and keeping the excess cash.

2. can i pay the interest or make payments on the amount i receive?

Yes, you can make monthly interest payment if you choose and you can also pay up to 10% of the amount borrowed (1 payment per year) if you wish.

However, you also have the option to pay nothing at all until you sell the property or until you pass away. Most people choose this option but it is nice to know that you can pay the interest every month (essentially turn the reverse mortgage into the same thing as a Home Equity Line Of Credit).

3. how do you determine how much i qualify for? i thought i could get 55% of my home value?

This is a common question that we get. It is important to note that you can qualify for up to 55% of the value of the property and not everyone will get this amount. The words ‘up to’ are very important in this statement.

To determine how much you qualify for, four different factors are used: The ages of all applicants, the property value, the property location (postal code) and the property type.

Here is a quick example for all 4 factors: Someone aged 80 will qualify for more than someone aged 60; someone in a city will qualify for more than someone in the countryside; someone with a property value of $500,000 will qualify for more than someone whose value is $200,000 and someone who lives in a detached house will usually qualify for more than someone who lives in a Condo.

4. i’m 60 but my wife is 53, can we still qualify?

Unfortunately, no. Both applicants need to be 55 or over to qualify. Even if just one of you is on the title, because it is deemed a ‘matrimonial home’ (meaning that the husband and wife both have a legal right to the home, by nature of being married) both of you need to be 55 or over.

5. what is involved in the application?

Reverse mortgages aren’t as difficult a process to go through as a traditional mortgage. However, you aren’t going to simply be given the money either – remember you are still talking about large amounts of money here and the lender is a Schedule A bank.

Your credit score and income are not usually significant factors in the application – but the lender will still check these. In addition to this, proof of identity and other such paperwork is required.

An appraisal is always required and is the first step – so the lender can identify the market value of your home and therefore how much they can lend. However, it is possible to get a ‘quote’ before this.

6. what if i want to sell my home?

You can sell your house at any time if you have a reverse mortgage. The mortgage amount (plus any accrued interest and prepayment penalties, if any) would then be paid from the proceeds of the sale. The process would be exactly the same as if you had any other kind of mortgage or HELOC on the property.

7. will i still own my home?

Yes, you will remain on the title for as long as you or your spouse live in the property and you can never be forced out of your home because of a reverse mortgage. In fact, from this point of view a reverse mortgage is ‘safer’ than a traditional mortgage. Under a traditional mortgage, you could lose your home for not paying your monthly mortgage payments. Since no such payments exist for a reverse mortgage, there is no such risk.

8. if i sell my house, can i re-apply for another reverse mortgage on my new property?

Absolutely! As long as the property is your primary residence – but just remember that you would need to qualify for enough to pay any mortgage on the new property. Reverse mortgages can be used for purchases in this way.

If you have any questions, please contact your local Dominion Lending Centres mortgage expert.

Published by DLC Marketing Team

Alternative lending in Canada refers to lending solutions that are not offered by traditional financial institutions like banks, credit unions, or trust companies. Instead, alternative lenders include private lenders, mortgage investment corporations (MICs), and other specialized lenders who offer non-traditional lending products.

These lenders typically provide financing options to individuals or businesses who may not qualify for loans from traditional lenders due to factors like low credit scores, high debt ratios, self-employment income, or unique property situations. Alternative lending can also be a useful option for those who need financing quickly or require more flexible lending terms than what traditional lenders can offer.

Alternative lending solutions come in various forms, including first and second mortgages, equity take-outs, construction loans, and bridge financing. While alternative lending options often come with higher interest rates than traditional loans, they can be a valuable resource for those who need financing quickly or require more flexibility.

Working with an experienced mortgage broker can help borrowers find the right alternative lending solution for their unique needs. Brokers can help assess a borrower’s financial situation, determine which lenders are a good fit, and negotiate terms on their behalf.

It’s important to note that alternative lending can also come with higher risks, including the potential for default or foreclosure. Borrowers should carefully consider the terms and conditions of any loan they are considering and work with a reputable lender and broker.

Overall, alternative lending can be a valuable tool for those who need financing quickly or who may not qualify for traditional loans. As with any financial decision, it’s essential to carefully consider all options, work with trusted professionals, and make informed decisions.

As a mortgage broker in Canada, I often get asked about second mortgages and how they work. Second mortgages can be a valuable tool for homeowners looking to access the equity in their homes for a variety of reasons. In this blog, I will explain what a second mortgage is, how it works, and some of the advantages and disadvantages of taking out a second mortgage.

What is a Second Mortgage?

A second mortgage is a loan that is taken out on top of your existing mortgage. This means that you will have two mortgages on your property, hence the name “second mortgage.” Second mortgages are typically used to access the equity in your home, which is the difference between the value of your home and the outstanding balance on your mortgage.

How Does a Second Mortgage Work?

When you take out a second mortgage, you will have two separate loans on your property. Your first mortgage will be your primary loan, and your second mortgage will be a secondary loan. The second mortgage is often at a higher interest rate than the first mortgage since it is considered to be a riskier loan.

The amount of money you can borrow with a second mortgage will depend on the equity in your home. Typically, lenders will allow you to borrow up to 80% of your home’s appraised value, minus the outstanding balance on your first mortgage. For example, if your home is worth $500,000 and you have a first mortgage of $300,000, you could potentially qualify for a second mortgage of up to $100,000 (80% of $500,000 is $400,000, minus the $300,000 first mortgage).

Advantages of a Second Mortgage

There are several advantages to taking out a second mortgage, including:

• Access to funds: A second mortgage can provide you with access to the equity in your home, which can be used for things like home renovations, debt consolidation, or to cover unexpected expenses.
• Lower interest rates than other types of loans: While the interest rate on a second mortgage is typically higher than the interest rate on your first mortgage, it is often lower than the interest rates on other types of loans, such as personal loans or credit cards.
• Flexible repayment terms: Second mortgages often come with more flexible repayment terms than other types of loans. This can include longer repayment periods, interest-only payments, or the ability to make lump-sum payments without penalty.

Disadvantages of a Second Mortgage

There are also some disadvantages to taking out a second mortgage, including:

• Higher interest rates than your first mortgage: As mentioned earlier, second mortgages typically come with higher interest rates than your first mortgage, which means you will be paying more in interest over the life of the loan.
• Increased risk of default: Since a second mortgage is a secondary loan, it is considered to be riskier than your first mortgage. This means that if you default on your payments, your second mortgage lender will be paid after your first mortgage lender, which could put your home at risk of foreclosure.
• Fees and charges: There may be fees and charges associated with taking out a second mortgage, such as appraisal fees, legal fees, and closing costs. These fees can add up quickly and increase the overall cost of the loan.

Is a Second Mortgage Right for You?

Whether or not a second mortgage is right for you will depend on your specific financial situation and goals. If you need access to funds and have significant equity in your home, a second mortgage may be a good option. However, it is important to weigh the advantages and disadvantages of a second mortgage before making a decision.

If you are considering a second mortgage, it is important to work with a reputable mortgage broker who can help you understand your options and find the best loan for your needs.