Bridge financing is short-term capital that covers the gap when you're buying a new property before selling your current one. The loan is secured against your existing home's equity, typically runs 6-12 months, and gets repaid when your old property sells.
If you've found the right property and can't afford to wait for your current home to sell first, a bridge loan lets you move forward on your timeline rather than the market's.
What Is Bridge Financing and How Does It Work?
Bridge financing in Ontario works like a temporary financial lifeline between two real estate transactions. You borrow against the equity in your current home to fund the down payment (and sometimes closing costs) on your next purchase. Once your existing property sells, the proceeds pay off the bridge loan.
Here's the typical structure:
The lender advances funds based on the confirmed equity in your current home—meaning you'll need a firm sale agreement or an appraisal establishing clear market value. Most bridge loans in Ontario range from $50,000 to $500,000, though amounts vary based on your equity position and the lender.
The key differentiator from a traditional mortgage: bridge financing is designed to be temporary. Terms typically span 90 days to 12 months. The expectation from day one is repayment upon your property sale—not years of amortized payments.
The Timeline of a Typical Bridge Loan
Week 1-2: You find your next home and need to move quickly. Your current property hasn't sold yet, or you haven't even listed it.
Week 2-3: You apply for bridge financing. Lenders review your existing home's equity, the purchase details, and your ability to carry both properties short-term if needed.
Week 3-4: Approval comes through. Funds are advanced to complete your purchase—often in as little as 24-48 hours with private lenders, or 2-3 weeks through traditional banks.
Months 1-6: You own both properties temporarily. You may continue marketing your existing home for sale.
Sale Closes: Your original property sells. Sale proceeds pay off the bridge loan, including any accrued interest and fees.
The entire structure assumes a finite exit—your sale. This is what makes bridge financing strategically different from simply taking on more long-term debt.
When Does Bridge Financing Make Strategic Sense?
Not every timing gap requires bridge financing. But certain scenarios make it the clear path forward.
Buying Before Selling (The Simultaneous Close Problem)
You've found the property. Perfect neighbourhood, right price, and you know it won't last. But your current home hasn't sold yet—or hasn't even hit the market.
Without bridge financing, you face two options: let the opportunity pass, or make an offer conditional on selling your home first. In competitive Ontario markets like the GTA, that conditional offer often loses to buyers with cleaner terms.
Bridge financing removes that condition. You can offer firm, close when the seller wants, and handle your sale on your own timeline afterward.
Pre-Construction Closings When Original Financing Falls Through
You purchased a pre-construction condo three years ago. Closing day approaches, and your original mortgage approval is no longer valid—maybe rates changed, maybe your income situation shifted, maybe the property appraised differently than expected.
Traditional lenders may need weeks or months to re-approve. Your builder needs funds on the closing date specified in your agreement.
Bridge financing can cover that gap: fund the closing now, refinance to permanent financing afterward. Your deposit stays protected, and you avoid the legal and financial mess of failing to close.
Renovation Delays on Your Sale Property
Your current home needs work before it's market-ready. The roof, kitchen, or dated bathrooms are preventing you from listing at full value. But you need cash to complete those renovations—cash that's currently tied up in the home itself.
A bridge loan can unlock that equity, fund the improvements, and get paid back when the renovated home sells at its higher price point.
Estate Settlements and Inheritance Situations
You've inherited property and need capital to settle the estate, pay siblings their share, or cover probate costs. The property will eventually sell, but you need liquidity now.
Bridge financing against inherited property can provide that immediate capital, with the future sale serving as your exit strategy.
The Real Costs of Bridge Financing in Ontario
Bridge loans carry higher costs than traditional mortgages. Understanding these costs—and whether they're justified by your circumstances—is the key decision.
Interest Rates
Bridge financing rates in Ontario typically range from:
Bank bridge loans: Prime + 2% to Prime + 3% (approximately 7-9% in current rate environment)
Private bridge loans: 8-12% annually, sometimes higher for complex situations
The rate premium reflects the short-term nature and increased risk the lender carries. They're providing capital on a property that may not sell at the expected price or timeline.
Fees
Beyond interest, expect these costs:
Lender fees: Typically 1-2% of the loan amount, charged upfront or deducted from proceeds
Legal fees: You'll need a lawyer to register the bridge loan against your property—often $1,000-$2,000
Appraisal fees: If required to establish current value, typically $300-$500
Administration fees: Some lenders charge setup or processing fees of $500-$1,500
A Real Cost Example
Scenario: You need $200,000 bridge financing for 4 months at 10% annual interest with a 1.5% lender fee.
| Cost Component | Amount |
|---|---|
| Interest (4 months) | $6,667 |
| Lender fee (1.5%) | $3,000 |
| Legal fees | $1,500 |
| Appraisal | $400 |
| Total Cost | $11,567 |
Is $11,567 worth it? That depends entirely on what you'd lose by not having bridge financing. If you'd forfeit a $50,000 deposit on your dream home, or if waiting another 6 months means paying an extra $30,000 for a similar property, the cost makes strategic sense.
Use our Bridge Loan Calculator to model your specific scenario.
Qualifying for Bridge Financing: What Lenders Evaluate
Bridge financing qualification differs from traditional mortgage underwriting, especially with private lenders.
Traditional Bank Requirements
Banks offering bridge loans typically require:
Firm sale agreement: Your existing property must have an accepted, unconditional offer. No sale agreement? No bank bridge loan.
Strong credit: Usually 650+ credit score, often 680+ for preferred rates
Income verification: Ability to carry both properties temporarily if your sale closes late
Low debt ratios: Your GDS/TDS must accommodate both mortgage payments during the bridge period
Existing relationship: Some banks only offer bridge financing to clients with their primary mortgage already in place
Private Lender Requirements
Private lenders focus more on the asset and less on the borrower's income or credit profile:
Equity position: Strong equity in your current property is the primary qualifier—usually 25-30%+ equity required
Clear exit strategy: Even without a firm sale, a realistic path to repayment (listing the property, pending sale negotiations)
Property condition: The security property needs to be marketable—not a teardown or major renovation project
Timeline reasonableness: Your proposed bridge period must align with realistic sale expectations for your property type and market
The key difference: private lenders can move without a firm sale agreement. If you have substantial equity and a credible plan, private bridge financing can fund your purchase while you finalize your sale process.
When Bridge Financing Doesn't Make Sense
Bridge loans aren't always the right answer. Consider these situations carefully.
When Your Equity Position Is Marginal
If you only have 10-15% equity in your current home, bridge financing becomes riskier for both you and the lender. The loan amount available will be small, the terms less favourable, and if your home sells for less than expected, you could face a shortfall.
When Your Sale Timeline Is Highly Uncertain
Bridge loans assume your property will sell within a defined period. If your home has been on the market for 6 months with no serious offers, adding more short-term debt may compound your problems rather than solve them.
When the Numbers Don't Work
Run the calculation honestly. If bridge financing costs $15,000 and waiting 3 months for your home to sell means missing a property you'd pay $10,000 more for anyway—you're spending $5,000 for convenience. That may or may not be worth it to you.
When Other Options Exist
Could you negotiate a longer closing date on your purchase? Could the seller accept a conditional offer given current market conditions? Could family funds bridge the gap at lower cost? Explore alternatives before defaulting to financing costs.
Bridge Financing vs. Traditional Options
| Factor | Bridge Financing | Home Equity Line of Credit | Sale Condition on Purchase |
|---|---|---|---|
| Speed | Fast (days to weeks) | Slow (requires application, approval) | No financing needed |
| Cost | Higher interest + fees | Lower interest, no lender fees | $0 |
| Risk | Property must sell to repay | Long-term debt if sale delays | May lose property to other buyers |
| Flexibility | High—works with various timelines | Medium—must qualify for HELOC | Low—seller must accept condition |
| Best for | Competitive markets, time-sensitive deals | Planned transitions with long runway | Buyer's markets, motivated sellers |
Working With a Mortgage Professional
Bridge financing sits at the intersection of timing pressure and financial complexity. Working with an experienced mortgage professional provides several advantages:
Lender access: Not all lenders offer bridge products, and terms vary significantly. A broker can match your situation to the right lender.
Structure optimization: Sometimes a different approach—a larger down payment from liquid assets plus a smaller bridge, for example—saves money overall.
Coordination: Your bridge loan, new mortgage, sale transaction, and legal closings all need to align. Experience prevents costly timing errors.
Exit planning: The best bridge loan is one with a clear repayment path. Your advisor should stress-test your exit strategy before you commit.
Explore more about time-sensitive bridge financing situations and how we structure these solutions.
Getting Started with Bridge Financing
If you're considering bridge financing, start here:
1. Clarify your timeline. When must your purchase close? When do you expect your sale to close? How much overlap exists?
2. Calculate your equity. What's your current home worth, and what do you owe? The difference drives what bridge financing can provide.
3. Model the costs. Use our Bridge Loan Calculator to understand total costs under different scenarios and timelines.
4. Explore your options. Traditional bank bridge loans work for some situations; private financing suits others. Get professional advice on which path fits your circumstances.
5. Plan your exit. How will the bridge loan get repaid? What happens if your sale takes longer than expected?
For real-world context, read how one Ontario homeowner used bridge financing to secure their dream home before their existing property sold.
Frequently Asked Questions
How long does bridge financing last?
Bridge financing in Ontario typically runs from 90 days to 12 months. Most bridge loans are structured for 3-6 months, aligning with typical property sale timelines. Private lenders may offer shorter or longer terms depending on your situation and exit strategy. The loan is designed to be temporary—repaid when your existing property sells.
What is the interest rate on a bridge loan in Ontario?
Bridge loan rates in Ontario currently range from approximately 7-9% through traditional banks (prime plus 2-3%) to 8-12% or higher through private lenders. The rate depends on your credit profile, equity position, and whether you have a firm sale agreement. Private lenders charge higher rates but offer more flexibility—often approving without a confirmed sale.
Can I get bridge financing if I have credit challenges?
Yes, bridge financing is available for borrowers with credit challenges through private lenders. Private bridge loans are primarily asset-based—your equity position and exit strategy matter more than your credit score. While traditional banks require strong credit (typically 650+), private lenders evaluate the property's value and your realistic path to repayment. Expect higher rates and fees, but options exist.
Is bridge financing worth the cost?
Bridge financing is worth the cost when the alternative—losing your target property, forfeiting a deposit, or selling under pressure—costs more than the financing itself. Calculate the actual numbers: bridge loan costs versus the price difference of waiting for another property, the lost deposit risk, or the potential below-market sale if you rush. For many Ontario homeowners in competitive markets or time-sensitive situations, the math favours bridge financing.
What happens if my property doesn't sell during the bridge loan term?
If your property hasn't sold when the bridge loan matures, you'll need to either extend the loan (if the lender agrees, typically at additional cost), refinance to a longer-term solution, or reduce your price to accelerate the sale. Planning for this possibility upfront is critical—discuss extension options and backup plans with your lender before closing. Most bridge situations resolve within the original term, but having contingencies matters.
