What is bridge financing for a house?

Bridge financing (also called a bridge loan) is a short-term loan that covers the gap when you buy a new home before your current home sale closes. If your purchase closes on May 1 but your sale does not close until May 15, you need bridge financing for those 14 days to cover the purchase. The bridge loan is secured by the equity in your old home and is repaid automatically when your sale completes and the proceeds arrive.

How much does bridge financing cost in Canada?

Bridge financing from a major bank or credit union typically costs prime rate + 1–3% (approximately 6–9% annualized) plus an administration fee of $250–$750. Because bridge loans are short-term (usually 7–90 days), the actual dollar cost is modest. A $300,000 bridge loan for 14 days at 8% costs approximately $920 in interest plus the admin fee — roughly $1,200–$1,700 total. Private bridge lenders charge significantly more: 10–18% annualized plus 1–2% lender fees.

Can you get bridge financing if your home is not yet sold?

It depends on the lender. Most A-lenders (banks) require a firm, unconditional sale agreement on your existing home before they will provide bridge financing. They lend against the confirmed sale proceeds. Some B-lenders and private lenders will provide bridge financing without a sale agreement, but at significantly higher rates (10–18%) and with lower LTV limits. Buying before selling without any bridge arrangement is risky and generally not recommended.

Bridge Financing Explained — How Bridge Loans Work in Canada

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

Common bridge financing scenarios

Scenario 1: Short overlap (most common)

Detail	Amount
Current home sale price	$650,000
Current mortgage balance	$350,000
Equity (available for bridge)	$300,000
New home purchase price	$750,000
New mortgage approved	$600,000
Cash needed at purchase closing	$150,000 (down payment) + $15,000 (closing costs) = $165,000
Bridge amount	$165,000
Bridge period	14 days
Bridge cost (8%, 14 days)	$508 interest + $500 fee = $1,008

Scenario 2: Longer overlap

Detail	Amount
Bridge amount	$250,000
Bridge period	60 days
Bridge cost (8%, 60 days)	$3,288 interest + $500 fee = $3,788

Still modest relative to the transaction, but the costs add up with longer periods.

Scenario 3: No firm sale (private bridge)

Detail	Amount
Current home listed but not sold	No firm offer
Bridge amount needed	$200,000
Private bridge rate	14%
Lender fee	2% ($4,000)
Bridge period	90 days
Interest cost	$6,904
Total bridge cost	$10,904 + legal fees

This is expensive and risky. Only proceed if you are confident the sale will close within the bridge period.

Step-by-step bridge financing process

Get your new mortgage approved — confirm approval before listing your current home or making an offer
List and sell your current home — aim for a firm (unconditional) sale before purchasing
Negotiate closing dates — try to align or minimize the gap
Apply for bridge financing — most lenders process this as part of the new mortgage application
Your lawyer coordinates — they handle the bridge draw at purchase closing and repayment at sale closing
Purchase closes — bridge funds are used to complete your purchase
Sale closes — proceeds from your sale automatically repay the bridge loan
Bridge loan discharged — balance paid off, any remaining proceeds deposited to your account

Red flags — when to reconsider

Red Flag	Why It Is Risky
Bridge period exceeds 90 days	Costs accumulate; risk of complications increases
Your home is not selling	You may carry two mortgages plus bridge interest indefinitely
You do not qualify for bank bridge financing	Private bridge costs can be $10,000+
The bridge amount exceeds your equity	Lenders will not approve; you may be overextended
Market is slowing and your home is overpriced	You may need to reduce the price, reducing available equity