Bridge financing in Canada solves one specific problem: you have bought a new home and your purchase closes before your sale does. The equity in your existing property exists on paper, but you cannot access it until the sale closes. A bridge loan advances that equity to you immediately, so both transactions complete without disruption. This is a standard product, but lenders have strict requirements, costs vary by lender and term, and the entire arrangement falls apart without a firm sale agreement in hand.
What Is Bridge Financing?
A bridge loan (also called a bridge mortgage or bridge financing) is a short-term loan secured against the net equity in a property you are selling. It covers the period between when you need funds for a new purchase and when you actually receive those funds from your completed sale.
The classic scenario: your new home closes on June 1 and your existing home closes on June 30. You need the net sale proceeds to cover your down payment and closing costs on the new property, but those funds will not arrive until a month after you need them. The bridge loan fills that gap. When your sale closes on June 30, the lender is repaid in full from the proceeds.
Bridge financing is not a long-term product. Most bridge loans in Canada run for 30 to 90 days, and the interest accrues on whatever is outstanding for exactly that many days.
How Bridge Financing Works in Canada
The bridge loan amount is calculated as the net equity you will receive from your sale, minus any deposit you have already collected. Lenders typically calculate it as:
Bridge amount = Sale price, minus outstanding mortgage balance on the sold property, minus deposit already received, minus estimated selling costs.
Two documents are mandatory before any institutional lender will advance bridge financing: a firm sale agreement on the property you are selling (all conditions waived) and a firm purchase agreement on the property you are buying (also firm). A conditional sale agreement is not accepted as bridge security under any circumstances. Lenders need certainty that repayment is coming from a confirmed transaction.
Interest accrues daily at the bridge rate from the date the funds are advanced. There are no monthly payments. The full principal plus all accrued interest is deducted from your sale proceeds at closing and remitted to the lender. If your sale closes early, you pay less interest. If it extends past the scheduled date, interest continues to accrue at the bridge rate until it closes.
Bridge Financing Costs in Canada
Bridge loan pricing is significantly above conventional mortgage rates. Most lenders price bridge financing at prime rate plus 2% to 4%, reflecting the short-term and higher-risk nature of the product. There are also flat administration and legal fees at origination.
| Cost Component | Typical Range | Notes |
|---|---|---|
| Interest rate | Prime + 2% to Prime + 4% | Accrues daily on outstanding balance |
| Administration fee | $200 to $500 | Charged at origination; varies by lender |
| Legal fees (bridge security) | $300 to $800 | Required to register the lien on sold property |
| 30-day bridge on $150,000 | Approx. $900 to $1,600 total | Interest plus admin and legal |
| 60-day bridge on $150,000 | Approx. $1,600 to $2,800 total | Interest doubles; fees are fixed |
| 90-day bridge on $250,000 | Approx. $3,500 to $5,500 total | Longer term and larger balance compounds cost |
| Private bridge loan rate | Prime + 6% to 10% (or flat) | Used when banks decline; short-term only |
The total cost of a short bridge is often lower than buyers expect. On a 30-day bridge of $200,000 at prime plus 3%, you are paying roughly $1,300 in interest plus fees. For buyers who have already committed to both transactions and need the bridge to close, this is a predictable and manageable cost. The risk is not the cost in normal conditions. The risk is what happens if your sale falls through after the bridge is advanced: you are then carrying two mortgages and a bridge loan simultaneously.
How Long Does a Bridge Loan Last?
Most institutional lenders in Canada cap bridge financing at 90 to 120 days. Some lenders have a stricter maximum of 90 days. Private and alternative lenders can extend bridge financing to six months or longer when the circumstances warrant it, at higher rates.
The bridge term is determined by the gap between your purchase closing date and your sale closing date. This is a detail worth managing at the offer stage. Negotiating a slightly later purchase closing date or an earlier sale closing date can shorten the bridge period and reduce the interest cost. On a large bridge balance, even reducing the gap by 15 to 20 days produces meaningful savings.
Which Lenders Offer Bridge Financing in Canada?
The major chartered banks (TD, RBC, BMO, CIBC, Scotiabank) all offer bridge financing, but typically only to clients whose new mortgage is placed with the same bank. If your new mortgage is with RBC, RBC will provide the bridge. If you move your mortgage to a different lender, you may lose access to bridge financing from your current bank.
Credit unions offer bridge financing to members with existing mortgage relationships. Availability and terms vary by institution and province.
Monoline lenders (lenders who operate exclusively through the broker channel) offer bridge financing when the new mortgage is also placed with them. Not all monolines have an active bridge product. Lender eligibility is something a broker confirms before the purchase offer is made.
Private lenders arrange bridge financing when the bridge term exceeds what institutional lenders will accept, when the qualifying income picture is complex, or when the property type involved falls outside standard underwriting. Private bridge loans carry higher rates and fees and are a last resort for situations that cannot be structured institutionally.
The critical rule: most lenders require the bridge loan and the new mortgage to be with the same institution. This is not negotiable at most chartered banks. It means that choosing where to place your new mortgage also determines your bridge financing options. A broker factors this into lender selection upfront.
Qualification Requirements for Bridge Financing
To qualify for institutional bridge financing, you need:
A firm sale agreement on the property you are selling, with all conditions removed. No conditional sales. The firm agreement is the lender’s primary assurance of repayment.
A firm purchase agreement on the new property. Both transactions must be confirmed and unconditional before the bridge is advanced.
Sufficient net equity. The bridge loan cannot exceed the net equity being released from the sold property. If your equity is thin after accounting for the outstanding mortgage and selling costs, the bridge amount may be lower than anticipated.
A mortgage relationship with the bridging lender. The new mortgage must be placed with the same lender providing the bridge, in virtually all institutional cases.
Standard income qualification. The bridge lender also assesses whether you can carry the total debt load during the bridge period, including both the bridge and the new mortgage. In most cases, the bridge is short enough that this is straightforward, but complex income situations may require documentation.
Bridge Financing in Ontario and Alberta
Ontario: Ontario buyers face one of the highest closing cost burdens in Canada because of land transfer tax (LTT). On a $700,000 purchase in Toronto, provincial and municipal LTT together run approximately $20,000 to $23,000, payable at closing. This amount needs to come from liquid funds, not bridge financing. First-time buyers receive a provincial LTT rebate of up to $4,000 and a Toronto municipal rebate of up to $4,475, but the net LTT liability is still substantial. Factor this into the total funds required at closing before determining how much bridge you need.
Alberta: Alberta has no provincial land transfer tax. The land titles transfer fee on a $600,000 purchase runs approximately $800 to $1,000. This substantially lower closing cost burden compared to Ontario means Alberta buyers who need bridge financing have a cleaner funding picture at closing. There is no large LTT liability consuming funds separately from the bridge and down payment.
In both provinces, the bridge financing mechanism works identically. The lender holds a lien on the sold property as security, and releases it when the sale closes and the bridge is repaid. The legal documentation is handled by the real estate lawyers involved in both transactions.
Why Timing Your Bridge Matters
Bridge financing is arranged as part of the mortgage transaction, not separately after the fact. If a closing date conflict emerges and you have not already discussed bridge financing with your broker or lender, you are addressing it at the worst possible time.
The right approach: when you are making an offer on a new property while your existing property is listed or conditionally sold, flag the bridge need immediately. Your broker confirms bridge eligibility, calculates the amount, and ensures the lender you are using for the new mortgage has an active bridge product before you commit to closing dates. Discovering that your chosen lender does not offer bridge financing after you have a firm purchase and sale is a serious problem that costs money to resolve.
Check today’s live rates at pekoe.ca/rates, updated daily. You can also get a pre-approval certificate in seconds.
Frequently Asked Questions
What is bridge financing in Canada?
Bridge financing is a short-term loan that advances the equity from a home you are selling so you can complete the purchase of a new home before your sale closes. It is repaid in full from your sale proceeds when the existing property closes, typically within 30 to 90 days. No monthly payments are required during the bridge period.
Do you need a firm sale to get bridge financing in Canada?
Yes. Every institutional lender in Canada requires a firm sale agreement with all conditions removed before they will advance bridge financing. A conditional sale agreement is not accepted as bridge security. If your existing home is listed but not yet sold, or is under a conditional offer, you do not yet qualify for bridge financing.
How much does bridge financing cost in Canada?
Bridge loan interest is typically calculated at prime rate plus 2% to 4%, accruing daily on the outstanding balance. Most lenders also charge an administration fee of $200 to $500 and legal fees for security registration of $300 to $800. On a $200,000 bridge for 60 days at prime plus 3%, expect total costs of approximately $2,500 to $3,500. Shorter bridge periods significantly reduce the total cost.
Can I get bridge financing if my new mortgage is with a different lender?
Generally, no. Most institutional lenders require the bridge loan and the new mortgage to be placed with the same institution. If your new mortgage is moving to a lender that does not offer bridge products, or to a lender different from where you currently bank, bridge eligibility needs to be confirmed before you commit to mismatched closing dates. A broker confirms this before you make an offer.
What happens if my sale falls through after I have taken bridge financing?
If your sale falls through after the bridge has been advanced, you are responsible for repaying the full bridge balance on its maturity date, regardless of whether the sale closed. This means you would be carrying the bridge loan balance, your existing mortgage (if not already discharged), and your new mortgage simultaneously. This scenario is why lenders require a firm sale agreement, not a conditional one, and why buyers should not rely on bridge financing for transactions where the sale is anything less than certain to close.
Work With Pekoe.ca on Your Bridge Financing
Bridge financing is a time-sensitive arrangement. If your purchase and sale closing dates do not align, the discussion with your broker needs to happen before offers are made, not the week before closing.