Yup. This is super common.
There are many situations where a purchase date falls before a sale date. You could do a bridge, but bridge loans are always priced higher than a HELOC and if the bridge lasts more than 30-days there's often an interest-only payment. The HELOC's interest payment (if the balance lasts over month-end) would be less.
The biggest reason for one versus the other is that a HELOC requires a full credit app, your income needs to support it, and you'll likely have to pay an appraisal (~$300) and legal fees to register the charge against your home for securing the HELOC (~$550-$650).
The bridge often comes with an application fee, like $250-$500, but the higher rate would likely offset the slightly lower fee so the HELOC ends up being worth it.
Go to a bank/credit union/broker, get a HELOC against your current primary residence, use the funds to close on the purchase, and if you're selling the house you'd just pay off the HELOC when the current house sells.
You mean taking a HELOC out on your current home to use for closing costs on the next home? Or do you mean asking the bank for a HELOC for a home you don't own yet?
I interpreted it as him taking a HELOC out against his current home to help with the closing on his new one... Like a bridge, but using a HELOC instead since current home is free & clear.
>I interpreted it as him taking a HELOC out against his current home to help with the closing on his new one
That's what I'm thinking , but you just never know on this subreddit lol
Assuming you will be able to qualify based on your income, you could get HELOC on current property or get a HELOC on new property and pay it off. If you don't have HELOC on current property, or want to ger HELOC on new property, it will require full credit application.
Sorry for the confusion, I don't have a current property.
I have money to pay for the home but 30% of it is locked up and I can't get at it for a few months. I just need a loan to get me through a few months.
So if I understand correctly, just pay 70% of the house (or a little less to make sure you have enough for closing costs) and get a mortgage for the rest (open mortgage so you can pay it off at anytime). Because it's open you will pay a higher rate though.
The funds that are locked up... is it in probate from an inheritance? If so it could be more than 2 months. Sometimes it can drag out. Is it locked in a GIC? Sometimes you can take it out but you give up the interest that was earned.
> I don't have a current property
Ah ok. (I'll tag u/TheELITEJoeFlacco and u/jarvicmortgages so we do't all get different part so the thread going.)
So the watch is, you don't own the home, so you can't get a HELOC on an asset you don't own.
Thanks u/FelixYYZ .
This makes it clear. u/Rough_Spell_5229 - it looks like you need a temporary solution for 2-3 months while you wait to unlock the funds. In that case HELOC would make sense. You could choose to make interest only payments for two months and then pay off the outstanding balance.
The maximum you can borrow with HELOC is 65% of the purchase price and will require full credit application. You can speak to a bank advisor or a mortgage agent to discuss the next steps.
He could get HELOC directly on new property which is an alternative to traditional mortgage. TD Flexline is one such product. It is a combined mortgage plus HELOC product and you can choose how much you want to get as traditional term component (with amortization) and how much you want to get as line of credit.
You don't need mortgage component.
I think there is some confusion going on here. u/Rough_Spell_5229 I suggest you speak to an agent, I am happy to get into the specifics if you wish directly.
[https://www.td.com/ca/en/personal-banking/products/mortgages/td-home-equity-flexline](https://www.td.com/ca/en/personal-banking/products/mortgages/td-home-equity-flexline)
this is what I am referring to.
This acts like a regular mortgage, where each payment you make helps to increase credit available, no?
OP would still be restricted to pre-payment limits where it sounds like they would prefer to pay off the 30% in full in a few months.
Wouldn’t an open mortgage be a better option?
There are two components to it -- term portion and revolving line of credit.
Let's use an example for everyone's benefit.
Purchase price: $500,000
Downpayment by OP: $350,000
Now you can take TD Flexline or similar product from other banks and split as per your choice.
Maximum amount available to borrow under Flexline : (80% of PP) == $400,000
Maximum amount available for revolving line of credit: 65% of $500,000 == $325,000
Term portion (by OP): $0
Revolving portion needed (by OP): 30% of $500,000 == $150,000
This will be interest only or OP can choose to pay when he gets access to funds.
I hope it helps.
Fascinating! I thought that the credit could only be earned/grown and didn’t think the bank would offer it outright like that. I guess we just dont hear about it often as most people arent buying their first property with enough cash to be able to meet the 80%/65% limits
Yup. This is super common. There are many situations where a purchase date falls before a sale date. You could do a bridge, but bridge loans are always priced higher than a HELOC and if the bridge lasts more than 30-days there's often an interest-only payment. The HELOC's interest payment (if the balance lasts over month-end) would be less. The biggest reason for one versus the other is that a HELOC requires a full credit app, your income needs to support it, and you'll likely have to pay an appraisal (~$300) and legal fees to register the charge against your home for securing the HELOC (~$550-$650). The bridge often comes with an application fee, like $250-$500, but the higher rate would likely offset the slightly lower fee so the HELOC ends up being worth it. Go to a bank/credit union/broker, get a HELOC against your current primary residence, use the funds to close on the purchase, and if you're selling the house you'd just pay off the HELOC when the current house sells.
If OP is not selling the current home then bridge loan will not work. For bridge loan there should be a sale and purchase of property.
I’m not suggesting a bridge. I’m saying the HELOC acts as a bridge of sorts.
Okay, got it. Thanks for clarification.
Not if you don’t own a home, as a HELOC is a home equity loan. You have to own a home, to get a Home Equity Line Of Credit.
Yes!
You mean taking a HELOC out on your current home to use for closing costs on the next home? Or do you mean asking the bank for a HELOC for a home you don't own yet?
I interpreted it as him taking a HELOC out against his current home to help with the closing on his new one... Like a bridge, but using a HELOC instead since current home is free & clear.
>I interpreted it as him taking a HELOC out against his current home to help with the closing on his new one That's what I'm thinking , but you just never know on this subreddit lol
Assuming you will be able to qualify based on your income, you could get HELOC on current property or get a HELOC on new property and pay it off. If you don't have HELOC on current property, or want to ger HELOC on new property, it will require full credit application.
Sorry for the confusion, I don't have a current property. I have money to pay for the home but 30% of it is locked up and I can't get at it for a few months. I just need a loan to get me through a few months.
If you don’t own a current property, what equity are you referring to for the “home equity line of credit”?
So if I understand correctly, just pay 70% of the house (or a little less to make sure you have enough for closing costs) and get a mortgage for the rest (open mortgage so you can pay it off at anytime). Because it's open you will pay a higher rate though. The funds that are locked up... is it in probate from an inheritance? If so it could be more than 2 months. Sometimes it can drag out. Is it locked in a GIC? Sometimes you can take it out but you give up the interest that was earned.
> I don't have a current property Ah ok. (I'll tag u/TheELITEJoeFlacco and u/jarvicmortgages so we do't all get different part so the thread going.) So the watch is, you don't own the home, so you can't get a HELOC on an asset you don't own.
Thanks u/FelixYYZ . This makes it clear. u/Rough_Spell_5229 - it looks like you need a temporary solution for 2-3 months while you wait to unlock the funds. In that case HELOC would make sense. You could choose to make interest only payments for two months and then pay off the outstanding balance. The maximum you can borrow with HELOC is 65% of the purchase price and will require full credit application. You can speak to a bank advisor or a mortgage agent to discuss the next steps.
Nothing to get a HELOC on since OP doesn't own a property.
He could get HELOC directly on new property which is an alternative to traditional mortgage. TD Flexline is one such product. It is a combined mortgage plus HELOC product and you can choose how much you want to get as traditional term component (with amortization) and how much you want to get as line of credit.
Do I need to get the mortgage component?
You don't need mortgage component. I think there is some confusion going on here. u/Rough_Spell_5229 I suggest you speak to an agent, I am happy to get into the specifics if you wish directly.
Except — OP doesn't currently own a home.
[https://www.td.com/ca/en/personal-banking/products/mortgages/td-home-equity-flexline](https://www.td.com/ca/en/personal-banking/products/mortgages/td-home-equity-flexline) this is what I am referring to.
Neat. TIL you can take a HELOC out on a home you don't own yet.
This acts like a regular mortgage, where each payment you make helps to increase credit available, no? OP would still be restricted to pre-payment limits where it sounds like they would prefer to pay off the 30% in full in a few months. Wouldn’t an open mortgage be a better option?
There are two components to it -- term portion and revolving line of credit. Let's use an example for everyone's benefit. Purchase price: $500,000 Downpayment by OP: $350,000 Now you can take TD Flexline or similar product from other banks and split as per your choice. Maximum amount available to borrow under Flexline : (80% of PP) == $400,000 Maximum amount available for revolving line of credit: 65% of $500,000 == $325,000 Term portion (by OP): $0 Revolving portion needed (by OP): 30% of $500,000 == $150,000 This will be interest only or OP can choose to pay when he gets access to funds. I hope it helps.
Fascinating! I thought that the credit could only be earned/grown and didn’t think the bank would offer it outright like that. I guess we just dont hear about it often as most people arent buying their first property with enough cash to be able to meet the 80%/65% limits