What is bridge financing in real estate?

Bridge financing is a short-term loan that bridges the gap between buying a new home and selling your current one. It covers the down payment and costs until your sale proceeds arrive.

How much does bridge financing cost in Canada?

Bridge financing typically costs 1-3% of the loan amount for a 30-90 day bridge. Interest rates are prime + 2-4%, plus administration fees of $500-1,000.

Can I get bridge financing without selling my home?

Yes, but you need a firm sale agreement or strong equity. Without a firm sale, lenders may require collateral from both properties and charge higher rates.

Bridge Financing Calculator Canada | Short-Term Loan Cost

Bridge Financing Calculator

Bridge Amount Needed

Bridge Period (Days)

Interest Rate (Annual)

Administration Fee

Interest Cost$2,795

Admin Fee$750

Total Bridge Cost$3,545

Effective Rate (Annualized)10.8%

Bridge Financing Cost Examples

Example 1: 30-Day Bridge

Details	Amount
Bridge amount	$150,000
Interest rate	8.5%
# Days	30
Interest cost	$1,048
Admin fee	$750
Total cost	$1,798

Example 2: 60-Day Bridge

Details	Amount
Bridge amount	$200,000
Interest rate	8.5%
# Days	60
Interest cost	$2,795
Admin fee	$750
Total cost	$3,545

Example 3: 90-Day Bridge

Details	Amount
Bridge amount	$300,000
Interest rate	9.0%
# Days	90
Interest cost	$6,658
Admin fee	$1,000
Total cost	$7,658

How Bridge Financing Works

Timeline Example

Day	Event	Financial Impact
Day 1	Close on new home	Need $200,000 down payment
Day 1	Bridge loan activated	Bank provides $200,000
Day 1-60	Own both homes	Interest accrues
Day 60	Close on old home	Receive sale proceeds
Day 60	Bridge repaid	Interest + fees deducted

What Does Bridge Financing Cover?

Use	Details
Down payment	When equity is tied up in old home
Closing costs	Legal, land transfer tax
Overlap costs	Carrying two properties temporarily

Bridge Financing Requirements

Standard Requirements

Requirement	Details
Firm sale agreement	On your current home
Purchaser financing	Buyer must be approved
Equity	Enough in current home
Mortgage approved	For new home
Same lender	Usually required

Without Firm Sale (Harder)

Requirement	Details
Higher rate	2-3% more
More equity	30%+ in current home
Both properties secured	Cross-collateralization
Shorter term	30-60 days typically

Bridge Financing Rates

Lender Type	Typical Rate	Admin Fee
Big 5 banks	Prime + 2-3%	$500-750
Credit unions	Prime + 2-3%	$500-750
Mortgage companies	Prime + 3-4%	$750-1,000
Private lenders	10-15%+	$1,000-2,000

Current prime rate: approximately 5.45% (2025)

Cost Comparison: Bridge vs Alternatives

Option 1: Bridge Financing

Factor	Details
Cost	$2,000-5,000 (typical)
Pros	Buy without selling first
Cons	Interest + fees

Option 2: Home Sale Condition

Factor	Details
Cost	$0
Pros	No bridge needed
Cons	Sellers may reject, weak offer

Option 3: HELOC on Current Home

Factor	Details
Cost	Prime + 0.5% (lower rate)
Pros	Cheaper than bridge
Cons	Must set up before selling

Option 4: Personal Line of Credit

Factor	Details
Cost	Prime + 2-4%
Pros	Flexible, available
Cons	Limited amount, unsecured

When to Use Bridge Financing

Good Scenarios

Situation	Why Bridge Makes Sense
Found dream home	Can’t wait to sell first
Hot market	Offers need to be clean
Short overlap	30-60 days, cost is minimal
Enough equity	Bridge amount is manageable

Avoid Bridge If

Situation	Better Alternative
No firm sale	Wait for sale
Long overlap (90+ days)	Costs add up
Tight finances	Risk of carrying two mortgages
Low equity	May not qualify

Calculating How Much Bridge You Need

Formula

Bridge Amount = Down Payment on New Home + Closing Costs - Cash Available

Example Calculation

Item	Amount
New home purchase price	$800,000
Down payment (20%)	$160,000
Land transfer tax	$25,000
Legal fees	$2,000
Total needed	$187,000
Cash available	$30,000
Bridge amount	$157,000

Bridge Financing Fees Breakdown

Fee	Typical Cost	When Charged
Interest	Variable (daily)	Throughout bridge
Administration	$500-1,000	At setup
Appraisal (if needed)	$300-500	At setup
Legal	$200-500	At setup
Discharge	$100-200	At completion

Tips for Lower Bridge Costs

1. Minimize Bridge Period

Action	Impact
Align close dates	Reduce days
Negotiate close date	With buyer/seller
Same-day close	Eliminates bridge need

2. Negotiate Rates

Approach	Details
Ask for match	If you have quotes
Loyalty discount	Existing mortgage customer
Bundle services	Mortgage + bridge

3. Use HELOC First

If you have a HELOC on your current home:

Lower interest rate
No setup fee (already exists)
Pay off when house sells

4. Reduce Bridge Amount

Action	Impact
Larger cash down	Less to bridge
Seller take-back	Reduce down payment need
Lower-priced home	Smaller down payment

Risks of Bridge Financing

Risk	Mitigation
Sale falls through	Only use with firm sale
Delays in closing	Build buffer into dates
Double mortgage payments	Budget for this scenario
Interest rate increase	Lock in if possible

Bridge Financing Checklist

Before Applying

Task	Status
Firm sale on current home	☐
Approved for new mortgage	☐
Calculate bridge amount needed	☐
Compare rates from 2-3 lenders	☐
Understand all fees	☐

At Application

Task	Status
Provide sale agreement	☐
Provide purchase agreement	☐
Sign bridge documents	☐
Confirm disbursement date	☐

At Closing

Task	Status
Bridge funds disbursed	☐
Close on new home	☐
Close on old home (repays bridge)	☐
Confirm bridge discharged	☐