When a property is sold, the sale proceeds are often used by your lawyer to pay out any mortgage balance still owing. Depending on the circumstances, there may be other debts owing, such as a legal judgment or lien against the property that the seller must pay. The funds left over after all obligations have been met are then usually allocated towards buying your new home.
When the net sale proceeds are expected to arrive after the date the sellers are expecting to move into their new home, the lawyer and financial institution will usually work together to arrange the provision of temporary financing until the sale proceeds arrive.
This temporary financial assistance is often referred to as “bridge financing” or “interim financing” because it helps cover the period between when sellers need the money to buy their new house and when their sale proceeds actually arrive. Once the sale proceeds do become available, the lawyer arranges to pay back the interim financing the sellers borrowed, plus accrued interest.
Interim financing is often arranged as a safeguard even where the possession dates are relatively close to one another, just in case it is required. If you have any questions about whether you should set up interim financing with your financial institution, contact your lawyer and your mortgage lender.