We are buying and selling a house. Our new house closes one day before our current house closes, therefore we require a bridge loan to make the down payment. I would like to understand the risks involved and what questions I should be asking my banker or lawyer. IE: I understand this is high-interest loan, meant to be short term. But is there a risk of the loan going beyond that one day and the potential to pay alot more interest than anticipated? Thank you in advance!
But is there a risk of the loan going beyond that one day and the potential to pay alot more interest than anticipated?
Yes, there is. If your house doesn't sell [even if you have a buyer, something may go wrong and the sale may not go through], you will be left holding the mortgage for your new house, + the 'bridge loan' for your old house. You would then need to make 2 payments at the same time until your old house sells. You should ask your banker what sort of cashflow you would need to be able to make in order to pay both amounts. You should also be very clear about what happens if the term of the loan extends beyond what was originally intended.
You should ask your lawyer what potential issues might still make the sale of your old house go through. ie: does the buyer have some contingency period where they are still waiting on a building inspection, etc.