If you're juggling a home sale and a purchase at the same time, bridge financing can free up the equity in your current property so you can make a competitive offer on a new one before the sale closes. A bridge loan gives you short-term access to your home's equity—typically for up to a few months—so you can cover the down payment or close on the new property while you wait for your sale to complete.

You’ll learn how bridge financing works in Canada, what lenders require, and practical steps to secure one without overextending yourself. Expect clear guidance on timelines, costs, and common pitfalls so you can decide whether this temporary loan fits your timing and risk tolerance.

Understanding Bridge Financing in Canada

Bridge financing gives you short-term funds to buy a new home before you sell your current one. Bridge financing Canada typically taps your existing home equity, carries higher costs than a standard mortgage, and lasts from a few weeks up to several months depending on your lender.

What Is Bridge Financing?

Bridge financing is a temporary loan designed to cover the gap between buying and selling properties. You use it when you need funds for a down payment, closing costs, or to carry two mortgages simultaneously while your current home remains unsold.

Lenders generally secure the bridge loan against your existing property, the new purchase, or both. That security means faster approvals than some unsecured options, but also greater risk if market conditions change and you can’t sell on schedule.

You’ll see bridge financing offered by major banks, mortgage brokers, and alternative lenders in Canada. Eligibility depends on your credit, debt-service ratios, and the expected sale price and timeline for your current home.

How Bridge Loans Work

A typical bridge loan advances a portion of your home’s equity—often up to 80% of the combined lending value across both properties. You can structure payments as interest-only during the term, with principal due when you sell, or you may roll the bridge into your new mortgage.

Terms commonly run to 90 days, though some Canadian lenders extend to six months or longer. Fees include interest charged at a higher rate than standard mortgages, administrative or setup fees, and sometimes appraisal or legal costs.

If your sale is delayed, you may face renewal fees or higher interest. Talk to your lender about automatic extensions and the exact repayment trigger (sale proceeds, refinance, or new mortgage funding).

Key Features and Terms

  • Interest Rate: Usually higher than your primary mortgage; can be fixed or variable.
  • Term Length: Commonly 30–90 days; some lenders offer up to six months.
  • Loan-to-Value (LTV): Lenders calculate LTV using the combined value of both properties; maximum LTVs vary by lender.
  • Repayment Options: Interest-only payments, full repayment at sale, or conversion into the new mortgage.
  • Fees: Setup/admin fees, appraisal, legal, and potential renewal charges.

You should request a clear cost breakdown in writing before signing. Compare offers on interest type, LTV limits, fees, and what counts as acceptable proof of an imminent sale to avoid surprises.

Securing Bridge Financing: Process and Best Practices

You’ll need to prove equity, income stability, and a clear repayment plan. Expect lender checks on your property value, outstanding mortgages, and timelines for sale or refinance.

Eligibility Criteria

Lenders typically require at least 20–25% equity in your current home after accounting for the bridge loan and existing mortgage balances. If you have less equity, you may still qualify but will face higher rates or stricter terms.
You must demonstrate stable income and a low-to-moderate debt-service ratio; prepare recent pay stubs, tax returns, and a list of recurring debts. Self-employed borrowers should supply up to two years of business financials and notices of assessment.

Credit score matters: many lenders want a score in the mid-600s or higher, though some private lenders accept lower scores at higher cost.
If you’re buying before selling, show a signed purchase agreement for the new property and a realistic marketing plan or agent listing for the existing home.

Application Process

Start with a mortgage broker or lender who handles bridge loans; they’ll compare offers and outline documents needed. Gather: property tax statements, existing mortgage statements, recent appraisal or comparative market analysis (CMA), income proof, and a purchase agreement if applicable.
Lender steps usually include an initial eligibility check, property valuation, underwriter review, and conditional approval. Expect faster turnarounds than a standard mortgage—often 7–21 days—because lenders price these as short-term products.

Negotiate terms before signing: confirm loan term length, repayment triggers (sale proceeds, refinance, or maturity), and whether the loan is interest-only or requires blended payments. Get all fees and conditions in writing.

Costs and Fees

Bridge loans carry interest plus administrative charges; interest rates commonly run above standard mortgage rates because of the short-term risk. Expect either a higher posted rate or a percentage above prime.
Upfront costs can include appraisal fees, legal fees, lender administration/setup fees, and sometimes a commitment or standby fee if the loan is unused for a set period.

Calculate total cost with a simple formula: (monthly interest × term months) + one-time fees. Compare this to alternatives like a HELOC or temporary mortgage to ensure the premium is justified. Ask lenders for an amortization schedule showing interest totals and any penalty triggers for early repayment.

Risks and Considerations

The primary risk is carrying two housing payments if your current home doesn’t sell quickly. This can strain cash flow and increase default risk. Plan for realistic sale timelines and add a buffer of 30–60 days beyond the expected closing.
Market downturns can reduce your expected sales proceeds and force a refinance at worse terms. Consider contingency plans: rent the property, extend the bridge term, or convert to a longer-term mortgage.

Be aware of potential legal or tax implications when using home equity across transactions. Read covenants and prepayment clauses carefully to avoid penalties. If unsure, consult a mortgage lawyer or independent financial adviser before committing.