Updated: April 2025  |  bremo.io financial guides

Bridge Loans in Canada: Short-Term Real Estate Financing

In a perfect real estate transaction, you'd sell your existing home, receive the proceeds, and use them to close on your new home — all on the same day. In reality, closing dates rarely align perfectly. A bridge loan fills the gap: it provides short-term financing to cover the period between buying a new home and receiving proceeds from selling your current one.

Bridge loans are a standard tool in Canadian real estate transactions, offered by most major banks and mortgage lenders. They're not exotic or complicated, but they do come with costs and risks that every Canadian homebuyer should understand before relying on one.

How Bridge Loans Work in Canada

Here's a typical scenario:

1. You own a home worth $600,000 with a $200,000 mortgage. Equity: $400,000.
2. You buy a new home for $750,000. You need $300,000 as a down payment.
3. Your new home closes June 1. Your old home closes June 15.
4. On June 1, you don't yet have your $400,000 in sale proceeds — you need a bridge loan for the $300,000 down payment.
5. The lender advances $300,000 as a bridge loan on June 1, secured against your old property.
6. On June 15, your old home closes. The sale proceeds ($400,000) pay off the bridge loan ($300,000) plus interest and fees, with $100,000 left over.

The bridge loan exists for just 14 days in this example, but the cost is still meaningful.

Bridge Loan Requirements in Canada

Most lenders require:

• A firm (unconditional) sale agreement on your existing property — most lenders will not bridge on a conditional sale
• The new home's purchase agreement
• Both closing dates confirmed
• Sufficient equity in the existing property to cover the bridge amount
• A mortgage approved for the new property (the bridge is typically offered alongside the new mortgage)

Without a firm sale, most banks will not offer a bridge loan. If your existing home hasn't sold yet and you need to close on the new one, you're in a more difficult position that requires private lender bridge financing — at significantly higher cost.

Bridge Loan Interest Rates and Costs in Canada

Bridge loans are short-term products and are priced accordingly:

• Interest rate: Typically prime rate plus 2–3% (roughly 7–8.5% in 2025). Applied daily on the outstanding balance.
• Administration fee: Usually $200–$500 flat fee to set up the bridge
• Legal fees: Your real estate lawyer handles the bridge loan registration — may add $200–$500

Because the term is so short, the total cost in dollars is often modest. A $300,000 bridge loan at 8% APR for 14 days costs approximately $925 in interest plus the admin fee — roughly $1,400–$1,500 total. For 30 days, the interest alone is about $2,000.

The cost scales if the bridge period extends. A 90-day bridge on $300,000 at 8% APR costs approximately $6,000 in interest alone. Factor this into your real estate transaction costs.

Which Lenders Offer Bridge Loans in Canada

Major Banks

RBC, TD, BMO, Scotiabank, and CIBC all offer bridge financing as part of their mortgage services. Typically only available alongside a new mortgage from the same lender. The process is straightforward for clients with an existing banking relationship and a firm sale in hand.

Mortgage Brokers

A mortgage broker can access bridge financing from multiple lenders, which is useful if your existing mortgage is at a different institution than your new one, or if the bank's requirements don't fit your timeline.

Private Mortgage Lenders (MICs)

Mortgage Investment Corporations and private lenders offer bridge financing when banks won't — particularly when you don't have a firm sale yet. Rates are much higher (10–15%+ APR) and terms more stringent, but access is broader. Private bridge loans are used by real estate investors and in situations where bank solutions aren't available.

Risks of Bridge Loans

The Sale Falls Through

The most serious risk. If your existing home sale collapses — the buyer backs out, financing falls through, or a home inspection issue arises — you're left holding a bridge loan without the expected repayment source. You'd be carrying two mortgages (the bridge plus the new mortgage) simultaneously until you find another buyer. This is financially very stressful and potentially devastating for some households.

Extended Timelines

Closing delays are common in real estate. A closing that slips by two weeks extends your bridge loan and multiplies the cost. Always have a financial buffer for the possibility of delays.

Costs Underestimated

First-time home buyers sometimes don't factor bridge loan costs into their transaction budget. Add all bridge costs (interest for the expected period plus a 30-day buffer, admin fees, legal fees) to your closing cost estimates.

Alternatives to a Bridge Loan

• Negotiate aligned closing dates: The simplest solution — work with your agent and lawyer to align your sell and buy dates. Often possible but not always.
• Make the purchase conditional on sale: Protects you financially but weakens your offer in competitive markets.
• Rent back your sold home: Negotiate with the buyer to rent your existing home for 30–60 days after closing, giving you time to receive proceeds before your new closing.
• Use a HELOC: If you have an existing HELOC with sufficient room, it can function similarly to a bridge loan at a lower rate. Must be in place before you list your home — you can't open one after you've sold.

Steps to Set Up a Bridge Loan

1. Confirm both closing dates with your real estate lawyer
2. Contact your mortgage lender (or broker) immediately when you have firm agreements on both transactions
3. Provide both purchase and sale agreements to the lender
4. Get the bridge loan details in writing — rate, term, fees, and total maximum cost
5. Coordinate with your lawyer to ensure the bridge funds are available on your new closing date
6. Plan for a buffer — assume the bridge may run 2–4 weeks longer than expected