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Summary: Bridge financing is a short-term loan against your current home's equity that covers the gap when your new purchase closes before your sale does. In Ontario, lenders usually require a firm sale, charge interest around prime plus 2% to 3% for the days outstanding, and are repaid from your sale proceeds.
You found the home, your offer was accepted, and the closing date is set. The only problem is that your current home has not closed yet, so the equity you planned to put down is still tied up in it. This is the exact timing problem bridge financing is built to solve, and for move-up buyers in Ontario it is one of the most common ways to make two transactions line up.
What is bridge financing?
Bridge financing, also called a bridge loan or interim financing, is a short-term loan secured against the equity in the home you are selling. It covers the period between the day your new purchase closes and the day you receive the proceeds from your sale, so your lawyer has the funds to complete the purchase even though your old home has not technically closed yet. When the sale does close, its proceeds repay the bridge loan in full.
It is genuinely short-term and self-liquidating: it is not a second mortgage you carry for years, and it exists only to cover a gap of days or weeks between two closings.
How does bridge financing work in Ontario?
The mechanics are straightforward once the pieces are in place:
You have a firm sale. Most institutional lenders require an unconditional agreement of purchase and sale on your existing home before they approve a bridge loan. A still-conditional offer usually does not qualify.
The lender sizes the loan. The bridge generally covers the down payment you need for the new home, less the deposit you already paid, drawn from the equity in the home you are selling.
Your lawyer draws the funds at closing. On the day your purchase closes, your lawyer uses the bridge funds to complete it and gives the lender a signed direction committing your sale proceeds to repay the loan.
Your sale closes and the loan is repaid. Once your old home closes, the net proceeds pay off your existing mortgage and the bridge loan, with interest for the days it was outstanding.
For the full picture of what happens on closing day, our purchase closing step-by-step guide walks through each stage.
What does bridge financing cost?
Because a bridge loan is outstanding for only a short time, the total cost is usually modest relative to what it lets you do. The figures vary by lender, but typically include:
Interest. Usually around prime plus 2% to 3% with a major bank, charged daily on the bridged amount for the number of days it is outstanding. A private or alternative lender will charge more.
An administration or setup fee. Commonly in the range of $200 to $500, regardless of how long the loan runs.
Possible legal and registration cost. For a small, short bridge, lenders often charge only the flat admin fee. For a larger or longer bridge, the lender may register a charge against your property, which adds legal work and cost.
As an illustration, a $150,000 bridge at roughly 7.5% over a 50-day gap works out to a little over $1,500 in interest, plus the setup fee. For how this sits alongside your other closing expenses, see our guide to the costs involved in a real estate transaction.
What do lenders require to approve a bridge loan?
Eligibility centres on the lender being confident the sale proceeds will arrive to repay the loan. In practice that usually means:
A firm, unconditional sale on the home you are selling, with all conditions waived.
Enough equity in that home to cover the bridged amount after your existing mortgage is paid out.
The ability to carry both properties briefly, which the lender assesses through your income and debt ratios.
The same lender on both mortgages, in many cases, since banks often extend bridge financing only to their own mortgage clients.
That last point catches people off guard. If you are switching lenders or porting your mortgage to the new home, confirm early whether bridge financing is even on the table.
Bridge financing vs the alternatives
Bridge financing is one of a few ways to handle a buy-and-sell, and it is not always the right one:
Option | What it does | Best when |
Bridge financing | Short-term loan against your current home's equity that covers the gap until your sale closes | Your sale is firm but closes after your purchase |
Same-day buy and sell | Both deals close the same day, so sale proceeds fund the purchase | You can align both closing dates |
HELOC | A line of credit on your current home you draw on for the down payment | You already have one and can make interim payments |
Porting your mortgage | Moves your existing rate to the new home; does not cover the timing gap | You want to keep your rate, not bridge a gap |
If your dates can be made to match, a same-day closing avoids a bridge entirely, though it carries its own coordination risk. Our take on why same-day closings can be problematic is worth reading before you commit to that timeline.
What are the risks?
Bridge financing is low-drama when a sale is firm, but a few scenarios deserve thought:
The sale falls through. If your buyer does not close, you can be left carrying your old mortgage, your new mortgage, and the bridge at once, with the loan still due at the end of its term. A firm, unconditional sale is what protects against this, which is why lenders insist on it.
The closing is delayed. A late sale closing can push past the bridge term, forcing you to negotiate an extension at additional cost, which is not guaranteed.
The sale closes for less than expected. If proceeds come in lower than planned, you need another source to fully repay the bridge.
What does your lawyer do in a bridge financing closing?
Your real estate lawyer is the one who actually manages the flow of funds across the two closings. On the purchase, they draw the bridge funds and give the lender a signed direction assigning your sale proceeds to repay the loan. On the sale, they discharge your existing mortgage, repay the bridge loan with interest, and account for the balance to you. If the lender registered a charge for a larger bridge, your lawyer also handles its registration and later discharge.
This is timing-sensitive work that depends on close coordination between your lender, your agent, and the lawyer on the other side, which is why experience with back-to-back closings matters. Our sale closing step-by-step guide shows the other half of the picture.
Frequently asked questions
Do I need a firm sale to get bridge financing in Ontario?
With a major bank, almost always. Most institutional lenders require an unconditional agreement of purchase and sale on your existing home before approving a bridge loan. If your home is not firmly sold, you would generally be looking at a private or alternative lender, at higher rates and fees.
How long can a bridge loan last?
It is short-term by design. Many lenders structure bridges for up to about 90 to 120 days, and some will go to six months or longer on a case-by-case basis. The goal is only to cover the gap between your two closings.
How is the interest calculated?
Interest accrues daily on the outstanding bridge amount for the number of days the loan is in place, and it is paid when your sale closes. Because the loan is usually outstanding for only days or weeks, the total interest is often a few hundred to a couple of thousand dollars.
Can I get bridge financing if I am switching lenders?
Often not. Many banks offer bridge financing only to clients who hold both the existing and the new mortgage with them. If you are changing lenders, ask about bridge financing before you commit to a purchase closing date.
Is bridge financing the same as a second mortgage?
No. A bridge loan is short-term interim financing that is repaid in full from your pending sale, not a long-term second mortgage you carry over years.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
At Ownright, we focus entirely on Ontario residential real estate law. We help buyers and sellers with purchase closings, sales, and refinancing, including the back-to-back buy-and-sell closings where bridge financing comes into play, pairing a digital platform that tracks every milestone with an in-house legal team you can reach by chat, email, or video call. You can start your closing online or get in touch with any questions.
Important note: This article is not legal or financial advice. Bridge financing terms, rates, and fees vary by lender and change over time; confirm current details with your lender or mortgage professional. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate professional advice.
