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May 23

Interim Financing – Make the process of selling a home and buying a home stress free

  • Mortgage News

How interim financing works

An interim or bridge financing loan is a temporary financing option designed to help homeowners “bridge” the gap between the time your existing home is sold and your new property is purchased. It enables you to use the equity in your current home to pay the down payment on your next home, while you wait for your existing home to sell.

Bridge loans are short-term solutions, typically less than one week in length, although they can be for as short a period they can extend for up to 30 days. To be eligible for a interim financing , a firm sale agreement (with all waivers in place including financing and home inspection) must be in place on your existing home.

Here is an example – your current home has a firm sale (all conditions waived) and the sale date is July 1st. You have purchased a new home and the purchase date is June 20th. You have $25,000 equity in the current home and that equity is needed as a down payment on the new home. A lender will provide a mortgage on the new home and will setup interim financing to loan you the equity from your home sale for the days of overlap. In this case that is $25,000 for ten days – from June 20th to July 1st.

There are some fees associated with interim financing but they are very reasonable – generally a set up fee of $250 and an interest cost accrued daily on the funds required. $25,000 for a period of ten days would equate to approximately $42.00 in interest costs plus the set up fee of $250 for a total cost of $292.00 for the ten day period. So quite a low cost for the benefit of being able to move into the new home and have a few days to complete the final move, clean up etc at the past home.

The law office handling the sale of the current home and purchase of the new home will also handle the interim financing details.

When you do sell, the law office uses the proceeds from the sale are used to pay back the interim financing and any accrued interest.

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Calling a snow day tomorrow! Friday fun ❄️☃️🧣🧦 Settled in @mountengadine. So far, this year was a whirlwind of activity in the housing and mortgage market. Thanks to our incredible referral partners and clients we provided a LOT of mortgage pre-approvals! 👩🏼‍💻👨🏻‍💻💵 🙌🏻 Some of our clients are finding the right home, some continue the search. Rates are stable. Lots of out of province interest in our housing market. Yes, Alberta is as pretty, fun and full of adventure as our photos! 🏔️🏔️🏔️ 

Tomorrow - a snow shoe, hiking Mount Rummel, cozy fires, delicious food and drink @mountengadine and cross country skiing at Mount Shark Saturday! 🤩

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      The Prime rate has risen by another .50%. For the The Prime rate has risen by another .50%. For the first time in 15 years, fixed rates are now lower than variable rates across the board. The borrowing costs for variable rate mortgage and lines of credit will rise. Not the news any of us wanted, but the new reality is that inflation is severely impacting the Prime lending rate and is not slowing quickly enough. 

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Three-month rates of change in core inflation have come down, an early indicator that price pressures may be losing momentum. However, inflation is still too high, and short-term inflation expectations remain elevated."

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Our clients were all approved at the federal government qualifying interest rate - at least 2% higher than the actual rate they received. 👍🏻 Rising rates were factored into their mortgage approvals. 

For variable rate mortgage holders - don’t lock into a fixed rate without a robust conversation around the reasons and possible outcome. Five years is a very long time. Variable rates are like waves. 🌊 They are peaking, will flatten and in the future (predicting when isn’t easy 🔮) will decline. It’s not a always going up or always going down situation. 📉📈

We are volitile times - serious inflation, supply chain challenges, war, global oil and gas shortages and rising costs energy costs are all playing a roll in the Bank of Canada’s rate decisions. 🤔

All interest rates are in essence “variable” as most Canadians have five year terms. Every five years the rate will change. To lock into a fixed rate at what may be the peak time of variable rates may not be wise. 🤓 These decisions are highly dependent on your personal situation, employment, budget, cash flow and future plans for the property. 🏠

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