Bridge Financing in Ontario, Explained
When your purchase closes before your sale, a bridge loan carries the gap. What it is, what lenders require before they'll offer one, what it costs, how long it runs — and when it isn't available at all.
The gap it fills
A bridge loan solves one specific problem: the calendar. Say your purchase closes June 1 and your sale closes June 28. From June 1 you owe the seller of your new home the full price — but much of your money, the equity that forms your down payment, is still sitting in the home you own until June 28. You are not short of money. You are short of money on June 1. A bridge loan is a short-term loan from your lender that covers that difference for exactly the days between the two closings, and is repaid the moment your sale closes and the proceeds land. It exists because closing dates rarely line up neatly.
How a bridge loan works
The mechanics are simple compared with a mortgage. Your lender advances what you need to complete the purchase — in practice, the equity you expect from your sale after selling costs, up to what the purchase requires. You pay interest only on the amount advanced, for the days it's outstanding; there's no amortization schedule, because the whole balance is cleared in one payment when your sale closes. The loan is secured against the home you're selling, which is why the lender cares so much about that sale being real. Bridge financing is usually arranged through the same lender providing your new mortgage, and it's set up in advance of the purchase closing — this is not a product you want to be requesting the week of closing. Whether it's even needed depends on the sequence you chose for the move, which we walk through in sell first or buy first.
What lenders require
One requirement matters more than all the others combined: a firm sale on your current home. Typically, lenders will only bridge against an unconditional sale agreement — conditions waived or fulfilled, deposit in hand, closing date set. Without a firm sale, most lenders will not bridge at all, because the loan is repaid from proceeds that might never arrive. If your purchase depends on bridging, the sale has to be firm before the purchase closes.
Beyond that, expect paperwork from both deals: the purchase agreement for the new home, the firm sale agreement for the current one, and the mortgage details for both properties. The amount available is based on your expected net equity — sale price minus the mortgage being discharged and selling costs like commission and legal fees — and lenders typically bridge only up to that figure. If your purchase needs more cash on its closing day than your net equity provides, the difference has to come from savings or another loan arranged ahead of time.
What it costs
Bridge loans are priced above regular mortgage rates — you're paying for short-term, situational money — and most lenders also charge an administration or setup fee. That sounds expensive until you run the shape of it: the balance is outstanding for days or a few weeks, not years, so the interest is usually modest next to the size of the move. The real cost driver is time: a three-week gap that stretches to three months because a closing moved is where the bill grows — the dates on both agreements matter more than the rate. Get the terms in writing when it's arranged — the rate, the fee, what happens if the sale closing moves — rather than discovering them at the lawyer's office.
How long it runs
Bridges are built for short gaps. Typically lenders allow up to about 90 days between the two closings; some allow longer, and the exact limit varies by lender and by your file. If your two closing dates are already more than a few months apart, flag it with your lender or broker early — either the bridge needs approval, or the dates need renegotiating before the offers are signed, not after. This is also why the bridge conversation belongs at the pre-approval stage: a good broker will ask about your sale's status and dates up front, because a purchase you can't fund on its closing day only gets worse with time.
When it falls apart
Three failure modes account for most bridge trouble. The sale falls through. If your buyer defaults or the deal collapses before closing, the repayment source vanishes while the bridge still comes due — you're left owning both homes and renegotiating with the lender from a weak position. This is the scenario the firm-sale requirement is defending against, and it's still not a guarantee. The closing dates move. A delayed sale closing extends the bridge and its interest, and can bump into the lender's maximum term. Condo status problems. If the home you're selling is a condo, issues surfacing in the status certificate review can stall or kill the buyer's deal — and with it, your bridge repayment. The common thread: the bridge is only as solid as the sale behind it.
Alternatives worth pricing first
A bridge loan is the fallback, not the plan. Often the gap can be designed away: align the closing dates at offer time (a same-day or sale-first closing costs nothing), take a longer closing on the purchase so the sale lands first, or arrange a home equity line of credit against your current home well in advance, while you still qualify easily — a HELOC takes weeks to set up and typically can't be arranged in a rush once a purchase is firm. The right one depends on the sequence you've chosen for the whole move.
The bottom line
Bridge financing is an ordinary tool: a short loan against a firm sale that lets two closing dates miss each other without sinking the move. It requires a firm sale, costs a little interest and a fee, and lives or dies on the reliability of your buyer's closing. But it's a tool for executing a sequence, not a substitute for choosing one — decide the order of your move first, with sell first or buy first, and then arrange the financing that sequence needs.
