Personal Finance

Question about Bridge Financing

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  • Aug 19th, 2016 12:49 pm
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Apr 11, 2009
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Question about Bridge Financing

Want to confirm my math.

Let's say I close on my new home on Oct 1. Mortgage is $440,000. My old home closes on Oct 7th. I need bridge financing to cover the gap.

For those 7 days, would I pay approx

My math is calculated as $440,000 x 4% = $17,600. 365 days / $17,600 = $48.22.
Total bridge loan for 7 days would be $48.22 x 7 = $337.53.

Is that correct? Or am I missing something here?

Thanks!

EDIT: Realized I should do the full home cost which would be $550,000 using the same formula as above. Therefore it would be $421.92 for 7 days.
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Jan 2, 2012
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Toronto
mkerian wrote: Want to confirm my math.

Let's say I close on my new home on Oct 1. Mortgage is $440,000. My old home closes on Oct 7th. I need bridge financing to cover the gap.

For those 7 days, would I pay approx

My math is calculated as $440,000 x 4% = $17,600. 365 days / $17,600 = $48.22.
Total bridge loan for 7 days would be $48.22 x 7 = $337.53.

Is that correct? Or am I missing something here?

Thanks!

EDIT: Realized I should do the full home cost which would be $550,000 using the same formula as above. Therefore it would be $421.92 for 7 days.
Bridge financing would only cover the down payment you require on new home. Rest would be in your usual mortgage.

Also from what I remember bridge financing rates are usually higher, I think in the 6-8% range.
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Feb 2, 2014
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mkerian wrote: Want to confirm my math.

Let's say I close on my new home on Oct 1. Mortgage is $440,000. My old home closes on Oct 7th. I need bridge financing to cover the gap.

For those 7 days, would I pay approx

My math is calculated as $440,000 x 4% = $17,600. 365 days / $17,600 = $48.22.
Total bridge loan for 7 days would be $48.22 x 7 = $337.53.

Is that correct? Or am I missing something here?

Thanks!

EDIT: Realized I should do the full home cost which would be $550,000 using the same formula as above. Therefore it would be $421.92 for 7 days.
I'm not sure your questions here.

Is the bridge financing for $400,000 or the mortgage? They are 2 different things.
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
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rob444 wrote:
mkerian wrote: Want to confirm my math.

Let's say I close on my new home on Oct 1. Mortgage is $440,000. My old home closes on Oct 7th. I need bridge financing to cover the gap.

For those 7 days, would I pay approx

My math is calculated as $440,000 x 4% = $17,600. 365 days / $17,600 = $48.22.
Total bridge loan for 7 days would be $48.22 x 7 = $337.53.

Is that correct? Or am I missing something here?

Thanks!

EDIT: Realized I should do the full home cost which would be $550,000 using the same formula as above. Therefore it would be $421.92 for 7 days.
Bridge financing would only cover the down payment you require on new home. Rest would be in your usual mortgage.

Also from what I remember bridge financing rates are usually higher, I think in the 6-8% range.
Bridge financing rates are generally Prime + 4%.
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
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Nov 24, 2013
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Kingston, ON
Your bridge loan isn't based on the full cost of the home. Your new mortgage starts the day you close on the new home, and interest on that mortgage begins then. Your bridge is the gap between the mortgage and what the bank needed to fund to close on the new home for you, basically your down payment, because equity for your down payment is still locked up in the old house.

So the amount of the bridge loan will be your ~$110k down, plus land transfer tax, lawyer's fees, etc., less any deposit you already paid to the sellers. Say ballpark that's $125k. $125,000 * 4%/365 * 6 (might only be 6 days interest instead of 7, depending on how they calculate it) would be $82.19. There may be another bridge loan initiation/admin fee as well.

https://canadamortgagenews.ca/2012/10/1 ... en-buying/
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Mar 11, 2016
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yes dont forget the admin fee..I did many bridge loans in my career ...if it was for a client who was getting a mtg with us then we would waive the fee yrs ago but now there is always a fee...these bridge loans are a PITA...tons of paperwork for a one week loan or even a couple of days....
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Sep 9, 2012
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Fjr2005 wrote: yes dont forget the admin fee..I did many bridge loans in my career ...if it was for a client who was getting a mtg with us then we would waive the fee yrs ago but now there is always a fee...these bridge loans are a PITA...tons of paperwork for a one week loan or even a couple of days....
Yes - factor in fees! Not every lender will do bridges. It can be $500 or more. Some will only do them if they're with a cerulean amount and/or timeframe but from your description of the situation you're looking for a fairly small bridge for a pretty short timeframe (ie lower risk).

In addition, beware that some lenders just have you sign loan paperwork. Some have you sign loan paperwork + a draft mortgage should the sale fall through - this will increase your legal costs a bit. Some lenders go one step further and require that the draft mortgage actually is a real mortgage that gets registered and then discharged on closing - this will cost a lot more in fees. Again though, you're probably just looking at loan paperwork and lender fee - just wanted you and the thread to beware that it can get more complicated/costly....
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Mar 11, 2016
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CanadianLurker wrote:
Fjr2005 wrote: yes dont forget the admin fee..I did many bridge loans in my career ...if it was for a client who was getting a mtg with us then we would waive the fee yrs ago but now there is always a fee...these bridge loans are a PITA...tons of paperwork for a one week loan or even a couple of days....
Yes - factor in fees! Not every lender will do bridges. It can be $500 or more. Some will only do them if they're with a cerulean amount and/or timeframe but from your description of the situation you're looking for a fairly small bridge for a pretty short timeframe (ie lower risk).

In addition, beware that some lenders just have you sign loan paperwork. Some have you sign loan paperwork + a draft mortgage should the sale fall through - this will increase your legal costs a bit. Some lenders go one step further and require that the draft mortgage actually is a real mortgage that gets registered and then discharged on closing - this will cost a lot more in fees. Again though, you're probably just looking at loan paperwork and lender fee - just wanted you and the thread to beware that it can get more complicated/costly....
yes..solicitor may have to sign letter of direction to payout the bridge so there may be a few extra $ in legal bill
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Dec 9, 2006
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So apart from interest, generally speaking what are the admin fees or lawyer fees? Are there's any other fees to factor in?
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sunnyd71 wrote: So apart from interest, generally speaking what are the admin fees or lawyer fees? Are there's any other fees to factor in?
Rate is Prime + 4.00%.

Lender fees vary. Last bridge loan I did had a $250 fee.

Lawyer fees always vary by lawyer. Some lawyers may charge extra for the bridge financing.
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative

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