Bridge Financing Explained — How Bridge Loans Work in Canada
Updated
Bridge financing solves one of the most stressful timing problems in real estate: when your purchase closes before your sale. This guide explains how bridge loans work, what they cost, when they make sense, and alternatives to consider.
How bridge financing works
The timing problem
In an ideal world, you sell your current home and buy your new one on the same day. In reality, closing dates often do not align:
Scenario
What Happens
Solution
Purchase closes before sale
You need money for the new home, but your equity is locked in the old one
Bridge financing covers the gap
Sale closes before purchase
You have the sale proceeds but nowhere to live temporarily
No bridge needed — just temporary housing
Same-day closing
Everything happens at once
No bridge needed
The flow of funds
Day 1 — Purchase closes:
Bridge lender provides short-term loan → Used to complete your purchase
Day 14 — Sale closes:
Buyer pays you for your old home → Your lawyer uses proceeds to repay bridge loan
Net result: You paid interest for 14 days and an admin fee
What the bridge loan covers
Component
Typical Amount
Down payment on new home
From equity in old home
Closing costs on new home
LTT, legal fees, adjustments
Mortgage discharge on old home
If your new mortgage does not cover the old one
Total bridge amount
Typically $50,000–$500,000+ depending on equity
Bridge financing costs
Bank / credit union bridge loans
Cost Component
Typical Rate
Interest rate
Prime + 1% to prime + 3% (approx. 6–9% annualized)
Administration fee
$250–$750 (one-time)
Appraisal
Usually not required if a firm sale exists
Legal fees
May be included in your closing legal work
Actual cost examples
Bridge Amount
Duration
Rate (8% annual)
Interest Cost
Admin Fee
Total Cost
$100,000
7 days
8%
$153
$500
$653
$100,000
14 days
8%
$307
$500
$807
$100,000
30 days
8%
$658
$500
$1,158
$200,000
14 days
8%
$614
$500
$1,114
$300,000
14 days
8%
$921
$500
$1,421
$300,000
30 days
8%
$1,973
$500
$2,473
$500,000
30 days
8%
$3,288
$500
$3,788
Key insight: For short bridge periods (7–30 days), the cost is modest relative to the transaction size. A $1,500 bridge cost on a $700,000 purchase is 0.2% of the transaction.
Private bridge lender costs
If you cannot get bank bridge financing (no firm sale, credit issues, non-standard property), private lenders charge significantly more:
Cost Component
Private Lender Rate
Interest rate
10–18% annualized
Lender fee
1–2% of loan amount
Broker fee
1% of loan amount
Appraisal
$300–$500 (usually required)
Legal fees
$1,500–$2,500 (separate from your purchase legal)
A $300,000 private bridge for 60 days at 14% plus 2% lender fee would cost approximately $6,900 in interest plus $6,000 in fees — $12,900 total. This is dramatically more expensive than bank bridge financing.
Qualifying for bridge financing
Bank bridge financing requirements
Requirement
Details
Firm sale agreement
Unconditional accepted offer on your existing home — most banks require this
Approved mortgage on new home
Your new mortgage must be approved and committed
Same lender
Most banks offer bridge financing only to their own mortgage customers
Maximum bridge period
Typically 30–90 days (some extend to 120 days)
Maximum amount
Usually up to the equity in your old home (sale price minus mortgage balance)
Credit score
Must meet standard lending criteria
When banks will NOT provide bridge financing
Situation
Why
Your old home is not yet sold
No confirmed proceeds to repay the bridge
Sale has conditions (inspection, financing)
Sale is not firm — lender has no certainty
Bridge period exceeds their maximum (usually 90 days)
Too long for their risk tolerance
You are using a different lender for the new mortgage
Most banks only bridge their own mortgage clients
Property type is non-standard (vacant land, commercial)
Higher risk — banks avoid
Bridge financing with a firm sale vs without
With a firm sale (bank bridge)
Factor
Details
Availability
All major banks, most credit unions
Rate
Prime + 1–3%
Max term
30–120 days
Risk to you
Very low — sale proceeds will repay the bridge
Total cost
$500–$3,000 typically
Without a firm sale (private bridge)
Factor
Details
Availability
Private lenders, some B-lenders
Rate
10–18% plus fees
Max term
60–180 days
Risk to you
High — if your old home does not sell, you carry two mortgages plus the bridge
Total cost
$5,000–$15,000+
Recommendation: Do not take out bridge financing without a firm sale unless you have a strong financial safety net and a clear plan for selling quickly.
Alternatives to bridge financing
Alternative
How It Works
Pros
Cons
Align closing dates
Negotiate purchase and sale closings for the same day
No bridge needed, no cost
Requires cooperation from both buyers and sellers
Extended closing on purchase
Ask the seller for a later closing date
Gives time to sell first
Seller may not agree, especially in a hot market
Sell first, rent temporarily
Sell your home, move to a rental, then buy
No bridge or timing risk
Moving twice, storage costs, rental market risk
HELOC on existing home
Use your home equity line of credit as a bridge
Flexible, no lender fee
Must already have a HELOC established; interest rate applies
Port your mortgage
Transfer your existing mortgage to the new property
Preserves rate, avoids penalty
Must qualify; limited portability window
Conditional offer on purchase
Make your purchase conditional on selling your home
Protects you financially
Sellers often reject conditional offers; weak in competitive markets