July Mortgage Update - How Much Does a Bridge Cost?

I often get asked how much a bridge will cost, so I thought I'd send out some information for this months update.

With interest rates going up along with down payments becoming larger and larger, sometimes the price of a bridge can be a little more than clients think, however it does take the stress out of closing for all involved, and if it's a regular down payment a couple weeks will still be relatively inexpensive.

As a reminder, the bridge is just a loan for the down payment, and the client will still have their old mortgage and new mortgage to pay on top of the bridge costs.

However, their first payment on their new mortgage will still be a month away if they choose a monthly payment, and the bridge loan has no payment until closing.

Here's a rough estimate of costs we see:

• Depending on the lender, Prime (3.70%) + 4.00 to 5.00%. So, ballpark 7.70 to 8.70% interest.

• Some lenders charge a small fee to bridge - usually around $300.

• Depending on the loan size and lender, sometimes the lawyer will need to register the bridge for $78 on the property, and there could be a small amount to discharge.

So what would a $250,000 bridge loan look like?

• Approximately $420 in interest to carry per week.

• Use an estimate of $400 to set up and discharge for easy math.

• If the client needed for 2 weeks, they'd pay $1240 approximately.

Where does this get expensive?

• If a client was down size and needed a 2 month bridge for a $800,000 home and were not needing a new mortgage, this would be around a $12,000 bridge based on financing the entire amount.

*This article was written by Jim Steffler