A bridge loan solves one of the most stressful timing problems in real estate: your new home closes before the sale of your current one, and the equity you need for the down payment is still tied up in the old home. Bridge financing lends you that equity for the days or weeks in between, and the sale proceeds repay it. This page explains how a bridge loan works, what lenders require and what the alternatives are; to work out what one would cost you, use the bridge financing calculator. It is part of our guide to mortgage types and features.
How a Bridge Loan Works
The timing problem
Ideally you sell your current home and buy the new one on the same day. In practice, closing dates often don’t line up:
| Scenario | What happens | Bridge loan needed? |
|---|---|---|
| Purchase closes before sale | You need money for the new home, but your equity is in the old one | Yes: bridge financing covers the gap |
| Sale closes before purchase | You have the sale proceeds but may need somewhere to live for a while | No: temporary housing instead |
| Same-day closing | Everything happens at once | No |
| Sale falls through after you’ve bought | No proceeds are coming to repay a bridge | A bridge won’t help; see “If the sale falls through” below |
The flow of funds
Purchase closing day:
Bridge lender advances a short-term loan -> used to complete your purchase
Sale closing day:
Your buyer pays for your old home -> your lawyer uses the proceeds to repay the bridge loan
Net result: interest for the days in between, plus any fee
TD describes bridge loans as loans that use your current home's equity to cover some of the costs of your new home, like the down payment, and adds that the amount of your bridge loan will be reduced by an estimated amount for closing costs.
What the bridge loan covers
| Component | Where the money comes from |
|---|---|
| Down payment on the new home | Equity in the old home |
| Closing costs on the new home | Land transfer tax, legal fees, adjustments |
| Mortgage discharge on the old home | If your new mortgage doesn’t cover the old one |
The amount you can bridge is generally limited to the equity you will actually receive from the sale.
The Firm-Sale Requirement
Banks lend a bridge because the sale proceeds are certain to arrive. RBC states that to qualify, a firm sale agreement must be in place on your existing home. TD asks for sale and purchase agreements and approval for a TD Canada Trust Mortgage or TD Home Equity FlexLine on the new property.
| Requirement | Details |
|---|---|
| Firm sale agreement | An unconditional accepted offer on your existing home |
| Approved mortgage on the new home | The new mortgage must be approved and committed |
| Same lender | Banks usually offer bridge financing to their own mortgage customers |
| Length of the loan | Set by each lender: TD says typically a maximum of 90 days; RBC says typically six months but can range from 90 days to 12 months or longer |
| Credit | Standard lending criteria apply |
When a bank usually won’t provide bridge financing
| Situation | Why |
|---|---|
| Your old home isn’t sold yet | No confirmed proceeds to repay the bridge |
| The sale still has conditions (inspection, financing) | The sale isn’t firm, so the lender has no certainty |
| The gap is longer than the lender allows | Beyond its risk tolerance |
| Your new mortgage is with a different lender | Banks usually bridge only their own mortgage clients |
| The property is non-standard (vacant land, commercial) | Higher risk |
Bank vs Private Bridge Loans
When a bank won’t bridge (no firm sale, credit issues, a non-standard property), private lenders may, at a much higher cost.
| Factor | Bank or credit union bridge | Private bridge |
|---|---|---|
| Needs a firm sale? | Yes | No |
| Rate | TD says bridge loans have interest rates similar to open rate mortgages, which are often higher than the interest rate you may be used to paying with your current mortgage | Often 10-18% a year |
| Fees | An administration fee, if any | Lender fee (1-2% of the loan), broker fee (around 1%), appraisal and separate legal fees |
| Risk to you | Low: the firm sale repays the bridge | High: if the old home doesn’t sell, you carry two mortgages plus the bridge |
Without a firm sale, a private bridge only works out if the old home sells within the loan’s term; a slow sale means more interest and possibly a lower price.
What a Bridge Loan Costs
Bridge interest is charged by the day, so the cost depends on the amount, the rate and the number of days. One example:
| Detail | Amount |
|---|---|
| Current home sale price | $650,000 |
| Current mortgage balance | $350,000 |
| Equity available | $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 |
| Interest (hypothetical 8% a year) | $506 |
| Fee (example) | $500 |
| Total cost | $1,006 |
For a short gap with a firm sale, the cost is small next to the size of the transaction; a longer gap, a higher rate or a private lender’s fees raise it quickly. The bridge financing calculator works out the cost for your own amount, rate, days and fee, including the cost as an annual rate.
If the Sale Falls Through
The firm-sale requirement protects the lender, but a firm sale can still collapse. TD warns that if for some reason your sales agreement falls through on your current house, you may have to pay two mortgages until a new sale is finalized. RBC calls bridge loans a higher risk because you're taking on a new loan with typically a higher rate and no guarantee that your home will sell during the term.
| Scenario | Consequence |
|---|---|
| Buyer backs out | You need a new buyer while carrying both homes |
| The closing is delayed | Each extra day adds a day of interest, and the bridge may come due first |
| Bridge term ends before the sale closes | You repay it another way or arrange different financing |
A line of credit or HELOC set up before the sale, or savings set aside for carrying costs, gives you room if this happens.
Alternatives to Bridge Financing
| Alternative | How it works | Pros | Cons |
|---|---|---|---|
| Align closing dates | Negotiate the purchase and sale to close on the same day | No bridge, no cost | Needs both the buyer and the seller to agree; risky if either closing slips |
| Extended closing on the purchase | Ask the seller for a later closing date | Time to sell first | The seller may not agree, especially in a hot market |
| Sell first, rent temporarily | Sell, move to a rental, then buy | No bridge or timing risk | Moving twice, storage costs, rental market risk |
| HELOC on the existing home | Draw on a home equity line of credit, then repay from the sale | Flexible, often a lower rate than a bridge | Must be set up in advance and have enough room |
| Port your mortgage | Move your existing mortgage to the new property | Keeps your rate and avoids a penalty | Must qualify; timing limits apply |
| Conditional offer on the purchase | Make the purchase conditional on selling your home | Protects you financially | Sellers often reject conditional offers |
| Carry both properties | Hold two mortgages until the old home sells | Time to sell | Must qualify for both; carrying costs add up |
How a HELOC compares with other ways to borrow against a home is covered in mortgage vs home equity loan vs HELOC. Moving a mortgage to the next home is explained in how to port a mortgage; if the new home needs more, the added funds are usually blended with your existing rate.
Step-by-Step Bridge Financing Process
- Get your new mortgage approved, ideally before listing your current home or making an offer
- Sell your current home, aiming for a firm (unconditional) sale before the purchase closes
- Negotiate closing dates to align them or keep the gap short
- Apply for bridge financing, usually as part of the new mortgage application, with the purchase and sale agreements, your current mortgage statement and the new mortgage approval
- Your lawyer coordinates the bridge advance at the purchase closing and the repayment at the sale closing
- Purchase closes: the bridge funds complete your purchase
- Sale closes: the sale proceeds repay the bridge loan
- Bridge loan discharged: the balance is paid off and any remaining proceeds go to you
Warning Signs
| Warning sign | Why it is risky |
|---|---|
| A long gap between closings | Costs accumulate and complications become more likely |
| Your home isn’t selling | You may carry two mortgages plus bridge interest |
| You don’t qualify for a bank bridge | Private bridge costs can run to thousands of dollars |
| The bridge amount exceeds your equity | Lenders won’t approve, and you may be overextended |
| A slowing market and a high asking price | A price cut reduces the equity available to repay the bridge |
Related Pages
Sources
The figures and rules on this page come from these sources, last checked against them on October 1, 2026. How we check facts.