What's a Bridge Loan, and Do I Need One If My Sale and Purchase Don't Line Up?
A bridge loan covers the gap when your purchase closes before your sale does. Here's when you actually need one, and when there's a simpler fix.
“• A bridge loan is short-term financing that uses the equity from your pending sale to cover the gap until it closes
• Most major Canadian lenders require your current home’s sale to be firm (subjects removed) before they’ll approve one
• Typical terms run 90 to 120 days, with interest usually around prime plus 2 to 4%”
The Timing Problem It Solves
Buying and selling at the same time rarely lines up perfectly. If your new home's completion date lands before your current home's sale closes, you're short the down payment or proceeds you were counting on from that sale. A bridge loan is short-term financing designed specifically to cover that gap, using the equity in your soon-to-be-sold home as security, so you're not stuck scrambling for cash between two closing dates.
What You Need to Qualify
The detail that trips people up most often: to qualify for bridge financing, you generally need a firm, unconditional sale agreement on your current home, meaning all subjects have already been removed. Lenders need that certainty to calculate how much equity you'll actually have available; without a firm sale, there's no reliable number for them to lend against. If your home hasn't sold yet, or your sale is still conditional, bridge financing typically isn't available through a standard lender, and your options narrow to private financing, which comes at a meaningfully higher cost.
You'll also need a purchase agreement in place for the new property, so the lender knows exactly how much bridge funding you're asking for and for how long.
What It Actually Costs
Bridge loans cost more than a regular mortgage, which makes sense given how short-term and specific-purpose they are. Expect an interest rate in the range of prime plus 2 to 4%, along with a flat administration fee, often a few hundred dollars. Most major banks cap standard bridge loans around 90 to 120 days, and if you need a larger amount or a longer term, some lenders may register a lien on your property, which adds legal fees to have it removed once the loan is repaid.
How It Actually Gets Repaid
The mechanics are simple even though the paperwork isn't: your lender or mortgage broker arranges the bridge loan alongside your new mortgage application, it funds at your purchase's closing, and it's automatically repaid the moment your current home's sale closes and the proceeds come through. You're not making payments on it for years; it's a short, purpose-built gap, not a second mortgage you carry indefinitely.
When You Might Not Need One
Not every timing mismatch requires bridge financing. If you have some flexibility, negotiating your purchase's completion date to land closer to (or after) your sale's completion date avoids the need for a bridge loan entirely, and it costs nothing to ask. A longer closing period on your current home's sale can also buy you the runway to close your purchase first without a gap. And if you have other accessible equity, a home equity line of credit set up in advance can sometimes serve a similar purpose at a lower cost, though it depends on your specific financial picture.
What This Means for You
Bridge loans get a reputation for being complicated, but the concept itself is straightforward: it's a short, well-secured loan that exists because closing dates rarely cooperate. The part worth planning ahead for is the "firm sale" requirement; if you think you'll need bridge financing, that's a conversation to have with your mortgage broker as soon as your sale goes firm, not after you've already committed to a purchase closing date that doesn't leave room to arrange it.
Worried Your Closing Dates Won't Line Up?
If you're planning a sale and purchase close together and want help thinking through the timing so your mortgage situation stays as simple as possible, send me a message and we'll map it out.
604.317.4464
Matt@RossettiRealty.ca
About Matt Council
Matt Council is a top-performing North Vancouver Realtor and West Van specialist with a background in finance. He moves beyond the sales hype to offer clients a data-driven, pressure-free approach to buying and selling real estate on the North Shore. Whether you are evaluating a presale in Lower Lonsdale or a detached home in Lynn Valley, Matt helps you understand the numbers behind the move.
Thinking of making a move? Let’s run the numbers.