Found your dream home but haven't sold your current one yet? Bridge financing covers the gap so you don't miss out on your new property while waiting for your existing home to sell. What Is Bridge Financing? Bridge financing (also called bridge loan or interim financing) is a short-term loan that: Covers the down payment gap when buying before selling Uses equity in your current home as collateral Is repaid when your current home sells Typical term: 1 day to 6 months When Do You Need Bridge Financing? Scenario 1: Closing dates don't align You're buying on June 1, but your sale closes June 15. You need 2 weeks of bridge financing. Scenario 2: Buying before selling You've found a new home but haven't yet sold your current one. Bridge financing covers the gap. Scenario 3: Conditional sale fell through Your buyer backed out after you committed to a purchase. How Bridge Financing Works Example: New home purchase price: $700,000 Down payment required: $140,000 (20%) Current home sale price: $500,000 Current mortgage balance: $200,000 Equity available: $300,000 Bridge loan: $140,000 (your down payment) Repaid from: $300,000 equity when current home sells Costs of Bridge Financing Bridge loans aren't cheap: Interest rates: Prime + 2% to Prime + 4% Administration fee: $200-500 Legal fees: $500-1,000 Example cost calculation: Bridge loan: $150,000 Rate: 8% Term: 60 days Interest: $150,000 × 8% × (60/365) = $1,973 Total cost: ~$2,500-3,500 for 60 days Qualification Requirements You typically need: Firm sale agreement on your current home (for traditional bridge) New purchase agreement Sufficient equity in current home Ability to carry both mortgages temporarily (if no sale yet) Without a firm sale: Some lenders offer bridge financing without a sold property, but: Higher rates More restrictive terms May require more equity How to Apply for Bridge Financing Option 1: Through your mortgage lender Many lenders offer bridge financing alongside your new mortgage. Option 2: Through a separate lender Banks and credit unions offer stand-alone bridge loans. Option 3: Through a broker We can arrange bridge financing from various sources. Alternatives to Bridge Financing 1. Align closing dates Negotiate your sale and purchase to close on the same day. 2. Include a condition on sale Make your purchase conditional on selling your current home. 3. Rent back from buyers Stay in your old home after closing while buying your new one. 4. HELOC in advance Set up a line of credit before listing so you don't need bridge. 5. Delay your purchase Wait to buy until after you've sold. Risks to Consider If your home doesn't sell: Extended bridge financing gets expensive, and you may need to reduce your asking price. If your sale falls through: You could be stuck with two mortgages and a bridge loan. Market downturn: If your home sells for less than expected, bridge loan repayment becomes challenging. Best Practices ✓ Have a firm sale before buying whenever possible ✓ Keep bridge period short (weeks, not months) ✓ Price your home realistically to ensure quick sale ✓ Have contingency funds in case of delays ✓ Work with experienced professionals who've handled complex closings What's Next Bridge financing is a useful tool but comes with costs and risks. Before committing to buy before you sell, understand all your options and have backup plans in place. Contact us to discuss your specific situation. Ready to Get Started? Contact us today for personalized mortgage advice and competitive rates. Get Pre-Approved Call (416) 822-7357 Frequently Asked Questions What Is Bridge Financing? Bridge financing (also called bridge loan or interim financing) is a short-term loan that: Covers the down payment gap when buying before selling Uses equity in your current home as collateral Is repaid when your current home sells Typical term: 1 day to 6 months When Do You Need Bridge Financing? Scenario 1: Closing dates don't align You're buying on June 1, but your sale closes June 15. You need 2 weeks of bridge financing. Scenario 2: Buying before selling You've found a new home but haven't yet sold your current one. Bridge financing covers the gap. Scenario 3: Conditional sale fell through Your buyer backed out after you committed to a purchase. Q: Can I get bridge financing without selling my home first? A: Yes, but it's more expensive and riskier. Lenders prefer firm sale agreements. Q: What if my home doesn't sell during the bridge period? A: You may need to extend the bridge (at a cost) or reduce your home price to sell quickly. Q: Is bridge financing available from all lenders? A: No. Some banks and most monoline lenders offer it, but not all. Q: Can I use bridge financing for a vacation property? A: Yes, but terms may be stricter. See our second home guide. Q: How far in advance should I arrange bridge financing? A: As soon as you're making an offer on a new property. Don't wait until closing approaches.
