When your purchase closes before your sale — how bridge loans work and what they cost
Bridge financing becomes necessary when the closing date on your new home purchase is earlier than the closing date on your existing home sale. This timing mismatch happens frequently in Canada's real estate market — sellers often want a late closing (to find their next home), buyers want an early closing (to lock in their new home), and these preferences frequently collide.
Most Canadian banks and lenders offer bridge financing only when: you have a firm (unconditional) sale agreement on your existing property, both properties are in the same province, and the gap period is within the lender's allowed window (typically 30–120 days, sometimes up to 180 days for special circumstances).
A bridge loan is not the same as your new mortgage. Your new mortgage is separately approved based on your income and the new property. The bridge loan is a short-term loan secured by the equity in your current (selling) home, providing the down payment funds before your sale closes. When your sale completes, the bridge loan is repaid from the sale proceeds.
Bridge loans are expensive relative to regular mortgages. Rates typically range from prime + 1.5% to prime + 3.0% (roughly 6.5%–8.0% in 2026), plus administration fees of $200–$750. For a $200,000 bridge over 45 days at 7.5%, the interest cost is approximately $1,849 — a worthwhile cost to avoid losing your dream home, but worth understanding and budgeting for.
Before arranging a bridge loan, see if you can negotiate closing dates. Can your vendor extend their closing to match your sale date? Can your buyer close sooner? Sometimes a small concession (a few thousand dollars off the price, a closing date bonus) is cheaper than a bridge loan.
If you have a HELOC on your existing home, you may be able to draw from it for the down payment. HELOC rates (prime + 0.50%) are cheaper than bridge loan rates. However, this requires your existing HELOC to have sufficient room and some lenders' HELOCs have restrictions on drawdowns while the property is for sale.
Family gifts or short-term personal loans from relatives can bridge the gap without lender involvement. If this is the route, ensure you understand the mortgage implications — lenders must be informed of gift sources for down payment purposes.
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Get KOHO Free — Code 45ET55JSYALast updated: March 2026. Rates and fees indicative. Not financial advice.