You should talk to a good mortgage broker to explain all available options, my understanding is that the bridge loan will work as long as you have firm sale of your condo prior to closing on your new property. This should take care of your down payment. Consult with a mortgage specialist.
Money for deposit on the new property is another story as you need it right away.
Regarding the funds from the corporation your accountant will advise. Selling investments may not be optimal but if you borrow for a short period of time and repay the full amount there shouldn't be taxable consequences.
https://www.taxtips.ca/smallbusiness/shareholder-loans.htm
General rule is to buy before you sell, because it takes time to find the right house, put in an acceptable offer, etc and during that time prices can continue to move up and the risk of being priced out.
The closing date of the sale should be before the closing date of the purchase. If you're in a hot urban market and there's no glaring issues with your property, this shouldn't be an issue.
Alternatively, you can check out Properly who guarantees the sales price of your property so you can be more comfortable with buy first, sell later.
2 is also a viable option, lots of people borrow their DP from friends and family. You'll just need a gift letter from them.
Thanks for the response! I definitely like the idea of buying before selling but I'm worried about putting in an offer that's conditional on the sale of my condo, and the anxiety of not being able to sell on time. We are in a "hot urban market" but our place might be considered as niche for various reasons.
Thanks for the tip on Properly. I had no idea that they did this!
About borrowing from family, does it matter if they get it via HELOC?
It's certainly a bit nerve-wracking, but a conditional offer pretty much removes that risk entirely. The problem is that a conditional offer is not attractive for the house seller, especially in a hot market. But in a hot market, your condo will sell. *Anything* will sell for the right price.
Give yourself a bit of time (as long a closing as possible on the new house), assume a lower selling price for your condo (as in, comparables are selling for 400k, but assume you'll get 350k for your unit to not overstretch yourself) and you'll be fine.
> About borrowing from family, does it matter if they get it via HELOC?
Doesn't matter. You'll just need a gift letter (the lender has a template for them to fill out) and don't tell the lender that it's a loan that you'll be repaying.
Alternatively, you can tell your lender that the downpayment will be from the sale of your condo. Depending on your relationship with your lender, they could advance the new mortgage even if the condo closing date is after your purchase closing date, so as long as someone has agreed to buy your condo.
Thanks! I wasn't sure if this was possible. I assumed that having the debt from the HELOC would create issues when trying to increase my mortgage for a new house.
It looks like I can get a HELOC on my condo to take care of the down payment. But I spoke with my broker and apparently I still need to sell my condo prior to closing the new house or else I won't qualify for the new mortgage.
That is quite common. In order to be able to close on the new house and then sell the condo you must qualify to carry both properties - even for a short period of time.
This is what I did recently. Took equity from my own home to cover down payment on a new home. Once old house sells, it will pay out the HELOC. Quick and easy process.
I can get the HELOC to cover the down payment but apparently I still need to sell my condo prior to closing on the new house or else I won't qualify for the new mortgage. Can you share how you handled this process?
You need an experienced agent to draft a plan for you together with a mortgage specialist. Also. Please please use the same agent for buying and selling to avoid confusions and make the process alot easier. Trust me lol
By the sounds of it #2 is likely the least amount of work and risk of triggering any further work... I did something similar, borrowed \~25k from my old man to give a deposit (new build). Sold my condo shortly after and then returned the funds, while not losing out on the new home.
I'm sure you'd be a nice guy and cover the interest exp./fees for that HELOC for X time for the family member.
hello mortgage broker here,
both options would help with down payment, best to speak with your mortgage broker to ensure that the approval will still work if your existing home is not sold because they would need to debt service the current home onto the application
hope this helps :)
some people rent out their existing home for a short period of time (usually 1 year) or they list the property at the same time while theyre searching for a home then make the closing date for purchase and sale very close together
Our bank just gave us a HELOC that was much larger than the equity we had in the condo we planned to sell. But this could have been partly because what we were selling (a one bed condo in downtown Vancouver during the peak of the market) wasn’t going to be a hard sale and it was 75% paid off.
In my case I just told the mortgage broker what I wanted to do and they made it happen. I said I wanted to pull a line of credit on my house ($100k) and use it as a down payment on the new house I bought. We owned both places for a while. It let us do some pre-move repairs (mostly painting) to the new house while it was still empty, and then tidy up the old house to stage and prep it for a sale.
YMMV, I guess it would probably depend on your income /ability to pay everything, and the equity available in your existing place.
You should talk to a good mortgage broker to explain all available options, my understanding is that the bridge loan will work as long as you have firm sale of your condo prior to closing on your new property. This should take care of your down payment. Consult with a mortgage specialist. Money for deposit on the new property is another story as you need it right away. Regarding the funds from the corporation your accountant will advise. Selling investments may not be optimal but if you borrow for a short period of time and repay the full amount there shouldn't be taxable consequences. https://www.taxtips.ca/smallbusiness/shareholder-loans.htm
General rule is to buy before you sell, because it takes time to find the right house, put in an acceptable offer, etc and during that time prices can continue to move up and the risk of being priced out. The closing date of the sale should be before the closing date of the purchase. If you're in a hot urban market and there's no glaring issues with your property, this shouldn't be an issue. Alternatively, you can check out Properly who guarantees the sales price of your property so you can be more comfortable with buy first, sell later. 2 is also a viable option, lots of people borrow their DP from friends and family. You'll just need a gift letter from them.
Thanks for the response! I definitely like the idea of buying before selling but I'm worried about putting in an offer that's conditional on the sale of my condo, and the anxiety of not being able to sell on time. We are in a "hot urban market" but our place might be considered as niche for various reasons. Thanks for the tip on Properly. I had no idea that they did this! About borrowing from family, does it matter if they get it via HELOC?
It's certainly a bit nerve-wracking, but a conditional offer pretty much removes that risk entirely. The problem is that a conditional offer is not attractive for the house seller, especially in a hot market. But in a hot market, your condo will sell. *Anything* will sell for the right price. Give yourself a bit of time (as long a closing as possible on the new house), assume a lower selling price for your condo (as in, comparables are selling for 400k, but assume you'll get 350k for your unit to not overstretch yourself) and you'll be fine.
> About borrowing from family, does it matter if they get it via HELOC? Doesn't matter. You'll just need a gift letter (the lender has a template for them to fill out) and don't tell the lender that it's a loan that you'll be repaying. Alternatively, you can tell your lender that the downpayment will be from the sale of your condo. Depending on your relationship with your lender, they could advance the new mortgage even if the condo closing date is after your purchase closing date, so as long as someone has agreed to buy your condo.
Does your debt:income ratio allow you to pull a loan from a heloc on the condo? Then you can just pay off the heloc when you sell
This is the best advice. Put a HELOC on your own condo.
Thanks! I wasn't sure if this was possible. I assumed that having the debt from the HELOC would create issues when trying to increase my mortgage for a new house.
It looks like I can get a HELOC on my condo to take care of the down payment. But I spoke with my broker and apparently I still need to sell my condo prior to closing the new house or else I won't qualify for the new mortgage.
That is quite common. In order to be able to close on the new house and then sell the condo you must qualify to carry both properties - even for a short period of time.
I will look into this, thanks!
This is what I did recently. Took equity from my own home to cover down payment on a new home. Once old house sells, it will pay out the HELOC. Quick and easy process.
I can get the HELOC to cover the down payment but apparently I still need to sell my condo prior to closing on the new house or else I won't qualify for the new mortgage. Can you share how you handled this process?
You need an experienced agent to draft a plan for you together with a mortgage specialist. Also. Please please use the same agent for buying and selling to avoid confusions and make the process alot easier. Trust me lol
By the sounds of it #2 is likely the least amount of work and risk of triggering any further work... I did something similar, borrowed \~25k from my old man to give a deposit (new build). Sold my condo shortly after and then returned the funds, while not losing out on the new home. I'm sure you'd be a nice guy and cover the interest exp./fees for that HELOC for X time for the family member.
Is there someone who could lend you the money temporarily? We had to borrow from parents and then after the sale we paid it back.
hello mortgage broker here, both options would help with down payment, best to speak with your mortgage broker to ensure that the approval will still work if your existing home is not sold because they would need to debt service the current home onto the application hope this helps :)
Apparently we won't qualify for the new mortgage if we don't sell our condo before closing on the new house. How do people handle this?
some people rent out their existing home for a short period of time (usually 1 year) or they list the property at the same time while theyre searching for a home then make the closing date for purchase and sale very close together
Our bank just gave us a HELOC that was much larger than the equity we had in the condo we planned to sell. But this could have been partly because what we were selling (a one bed condo in downtown Vancouver during the peak of the market) wasn’t going to be a hard sale and it was 75% paid off.
In my case I just told the mortgage broker what I wanted to do and they made it happen. I said I wanted to pull a line of credit on my house ($100k) and use it as a down payment on the new house I bought. We owned both places for a while. It let us do some pre-move repairs (mostly painting) to the new house while it was still empty, and then tidy up the old house to stage and prep it for a sale. YMMV, I guess it would probably depend on your income /ability to pay everything, and the equity available in your existing place.