Bridge financing solves a common real estate timing problem: you want to buy your new home before your current one sells. This guide explains how bridge loans work, what they cost, and when they make sense. What Is Bridge Financing? A bridge loan is short-term financing that "bridges" the gap between buying your new home and receiving funds from selling your current one. How It Works Timeline example: Event March 1 Your new home closes (you need funds) March 15 Your current home closes (you receive funds) Gap 14 days—bridge loan covers this period The loan covers: Down payment for new home Closing costs Any gap between purchase and sale proceeds When Bridge Financing Is Needed Common Scenarios Bridge Needed? Sale closes before purchase No Purchase closes before sale Yes Same-day closing Usually no Sale has conditions May need bridge Why Timing Gaps Happen Seller of new home requires fast closing Buyer of your home needs extra time New home is a builder completion Unexpected delays in your sale Planning Your Transition? Contact our team to discuss bridge financing options and plan your purchase-and-sale timeline. Bridge Loan Costs Interest Rate Typically prime + 2% to prime + 4% Example at prime + 3%: Prime rate: 5.00% Bridge rate: 8.00% $200,000 bridge for 30 days Interest cost: $200,000 × 8% × (30/365) = $1,315 Additional Fees Typical Amount Administration fee $200 - $500 Legal fees Included in purchase legal Appraisal (if required) $0 - $400 Total Cost Example Amount Interest (30 days on $200K) $1,315 Admin fee $300 Total bridge cost $1,615 For short-term financing, this is reasonable—but longer gaps become expensive quickly. Requirements for Bridge Financing Must-Have Conditions Firm sale on current home - Conditions must be removed Firm purchase on new home - All conditions satisfied Known closing dates - Both dates confirmed Acceptable equity position - Equity available to bridge Qualification Factors Requirement Credit score 600+ (varies by lender) Sale status Firm and unconditional Maximum term Usually 90-120 days Maximum amount Varies—often up to $500K Where to Get Bridge Financing Option 1: Your Mortgage Lender If your new mortgage is with a bank or credit union, they often provide bridge financing: Seamless integration with mortgage Often lowest rates Single point of contact Option 2: Private Lenders If your mortgage lender won't bridge: More flexible qualification Higher interest rates Faster approval May bridge larger amounts Option 3: Line of Credit If you have available credit: Use existing HELOC or credit line No new application Interest only on what you use Alternatives to Bridge Financing 1. Align Your Closing Dates Strategy: Negotiate both closings for the same day or close together. Challenge: Requires cooperation from all parties. 2. Sale with Extended Closing Strategy: Sell your home with a longer closing period. Benefit: Gives time to find and close on new home first. 3. Rent-Back Arrangement Strategy: Sell your home but rent it back from the buyer temporarily. Benefit: Stay in current home until new one is ready. 4. HELOC Before Selling Strategy: Set up HELOC on current home before listing. Benefit: Access equity without formal bridge loan. Bridge Financing Pitfalls What Can Go Wrong Consequence Your sale falls through Bridge loan becomes expensive or impossible Longer delay than expected Interest costs mount Insufficient equity May not qualify for full amount needed Closing cost surprises Bridge may not cover everything How to Protect Yourself Don't remove conditions on purchase until sale is firm Build buffer into bridge amount Have backup financing plan Work with experienced real estate lawyer What's Next Planning a purchase before your sale closes? Talk to our team early—we'll help you structure the timing and financing to minimize bridge costs. 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? A bridge loan is short-term financing that "bridges" the gap between buying your new home and receiving funds from selling your current one. The loan covers: Down payment for new home Closing costs Any gap between purchase and sale proceeds Planning Your Transition? Contact our team to discuss bridge financing options and plan your purchase-and-sale timeline. Q: Can I get bridge financing if my sale is still conditional? A: Usually no—lenders require a firm, unconditional sale before providing bridge financing. Q: What if my sale closes late? A: You may be able to extend the bridge loan, but interest continues to accrue. Delays are expensive. Q: Is bridge financing available for investment properties? A: Yes, though requirements may be stricter and rates higher. Q: Can I use bridge financing for a down payment on a pre-construction condo? A: Typically no—bridge loans are for imminent closings, not deposits years in advance. Q: What's the maximum bridge financing term? A: Usually 90-120 days. Longer terms may require alternative financing.
