Every once in a while people need a bridge to get them from point A to point B. This can be required for any number of reasons from divorce, less than perfect credit, unable to accurately prove income due to self employment, fix & flip or need to take advantage of an opportunity.
Bridge loans are also described as private or hard money loans. While not inexpensive they do service their purpose in helping those who need it obtain financing when they would otherwise not have it. However take note that these are not long term solutions and should only be used as a bridge to get you from where you are to where you want to go.
In most cases these loans are interest only so you are not paying down any of the principal. So once your credit has improved, you are able to prove income for an A lender and your project is completed then it’s time to exit the bridge loan for a less expensive option.
One of the benefit of this product is that it puts more of its emphasis on the value of the property than on the strength of the borrower. For this reason rates are normally 12% in first position and lender’s fee’s can be as high as 8%. Downpayment or equity in the property must be at least 25% of the value for this to work as well. So while they are a viable solution to many problems they are not for everyone, this is why I always advise my clients in advance the risks and the costs of this option before proceeding.
Today I am thankful for having my daughter home from university last week, getting back on track on a few projects that I had put to the side and helping clients find solutions that worked for them.
I look forward to hearing from you in regard to your mortgage needs.
p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2022-3000179) Broker (2022-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).
p.s.s.s You can download my new mortgage app here