If you need to buy a new home before your current one sells, bridge financing lets you tap your existing equity to cover the down payment and close the gap between sale and purchase. A bridge loan gives you short-term access to your home’s equity so you can carry two mortgages briefly and move forward with a purchase without waiting for your sale to close.

You’ll find clear guidance on how bridge financing works in Canada, what costs and timelines to expect, and when it makes financial sense compared with alternatives. Expect practical details on eligibility, application steps, and which lenders commonly offer these short-term loans so you can decide whether a bridge loan fits your move.

Bridge Financing in Canada Overview

Bridge financing Canada helps you buy a new home before your current property sells by providing short-term funds secured against your existing equity. It typically covers the down payment or closing gap, charges interest and fees, and is repaid when your sale completes.

What Is Bridge Financing?

Bridge financing is a short-term loan that uses the equity in your current home as collateral to fund the purchase of another property. You get immediate access to cash—commonly to cover a down payment or to close a purchase—while you wait for your existing home to sell.

Typical terms are 30–120 days, though some lenders extend to six months. Costs include interest (often higher than standard mortgages) and administrative or setup fees. Lenders assess your credit, existing mortgage balance, and home equity to determine how much you can borrow.

How Bridge Loans Work in Canada

You apply to a bank or alternative lender, which places a temporary charge against your current property. The lender advances funds that you use toward the new purchase; when your current home sells, sale proceeds pay off the bridge loan.

Repayment structure varies: some lenders require monthly interest payments, others roll interest into the loan principal to be paid at the end. Expect higher interest rates than long-term mortgages and possible appraisal, legal, and administrative fees. Lenders typically require substantial equity—often 20–30%—and proof you can sustain payments if the sale delays.

Types of Bridge Loans Available

• Open bridge loans: Flexible payoff timing, allow prepayment without penalty, and suit uncertain sale timelines.
• Closed bridge loans: Fixed payoff date tied to a sale contract; may carry penalties for delayed payoff.
• Standalone bridge loans: New short-term loan secured only by your current home.
• Mortgage-based bridge (second charge): Lender places a second mortgage while your first mortgage remains; often offered by your primary bank.

Each type differs in repayment flexibility, fees, and eligibility. Choose based on how certain your sale closing date is, your tolerance for fees, and whether you prefer interest-only payments or interest rolled into principal.

Differences Between Bridge Financing and Traditional Loans

Bridge loans are temporary, higher-cost, and tied to home-sale timelines. Traditional mortgages fund home purchases for long terms (e.g., 15–30 years) with lower rates and structured amortization.

Bridge financing is secured by equity in your current home and is repaid quickly after sale. Traditional loans base approval on income, credit, and long-term debt ratios and amortize principal over years. Bridge loans focus on liquidity for a specific timing gap; traditional mortgages focus on long-term financing and stable monthly payments.

Eligibility, Application, and Lenders

You need sufficient equity, clear documentation, and a lender that offers bridge financing. Expect lenders to check income, credit, sale and purchase contracts, and timelines before approving a short-term secured loan.

Common Eligibility Criteria

Lenders typically require at least 20% combined equity across the properties, although some will accept lower equity with higher rates or private underwriting.
You must show a firm sale agreement for your current home or acceptable proof of marketable equity; lenders favor a signed purchase agreement for the new property with a definite closing date.

Credit score and debt-service ratios matter. Expect verification of income, employment, and existing mortgage standing.
If you plan to keep two mortgages temporarily, lenders will calculate your gross debt service (GDS) and total debt service (TDS) to confirm you can cover payments on both properties.

Private lenders and alternative lenders may approve deals without a sale contract, but they charge higher fees and require larger equity cushions.
Prepare recent property appraisals, tax assessments, and closing-cost estimates to speed approval.

Application Process for Bridge Financing

Start by gathering the sale agreement for your current home and the purchase agreement for the new home.
Include the signed offers with firm closing dates, recent mortgage statements, proof of income (pay stubs or T4s), and a recent appraisal or broker price opinion.

Work with your mortgage broker or bank to submit a combined application that may include your new mortgage and the bridge loan.
The lender will assess equity, credit, income, and the timing gap between closings; typical underwriting time ranges from a few days to a few weeks depending on complexity.

Expect conditional approvals that require confirmation of the sale closing.
If you don’t have a firm sale date, ask about private-lender bridge options or contingency clauses; these approaches add cost and stricter repayment terms.

Major Bridge Loan Providers in Canada

Big banks—RBC, TD, and others—offer bridge financing tied to standard mortgage products and usually limit the term to about 90 days.
You’ll get integrated processing if you already hold a mortgage with the bank, which can simplify paperwork and lower fees.

Credit unions and online lenders sometimes provide bridge loans but policies and availability vary by institution.
They may be more flexible on qualifying documents but still require equity and proof of sale or purchase.

Private lenders fill gaps when a firm sale isn’t available or when timelines are tight.
Expect higher interest, administrative fees, and shorter repayment windows from private lenders; they accept higher risk but require more collateral or larger down payments.

Typical Terms, Rates, and Fees

Bridge loans are short-term, commonly 30 to 90 days, though some lenders extend terms to 6 months with renewals.
Interest rates usually run above standard mortgage rates; bank offers are generally lower than private-lender rates.

Fees can include an administration fee, appraisal fee, legal costs, and possible discharge or setup fees.
Banks may roll interest into the mortgage or require monthly interest payments; private lenders often require interest to be paid or capitalized at term end.

Repayment typically occurs when your current home sale closes; lenders may demand a fixed payoff date tied to the sale closing.
Ask for a written estimate of all fees and an annualized cost comparison before committing.