Your new home closes before your old one sells. Bridge financing covers the gap, if you plan it well.
A bridge loan is short-term money that lets you close on your next home while you wait for the sale of your current home to finish. It is repaid from the sale proceeds. It works best when the sale is already firm, so the main question is how certain your sale really is.
You've started an application.
Saves as you go · No credit check · A licensed mortgage professional follows up
1A bridge loan is a short-term loan, usually from a few days up to several months, secured on your existing home and sometimes the new one. It is repaid when your current home sale closes.
2Lenders usually want to see a firm, unconditional agreement to sell. A sale that is still conditional, or no sale yet, makes a bridge much harder to arrange and riskier for you.
3Costs include interest and usually a lender or administration fee, plus legal costs. Because the loan is short, the fee often matters more than the rate.
4Some banks offer bridge financing with your new mortgage, so ask yours first. A broker can also compare alternative and private bridge lenders when a bank will not.
Get ready
What lenders will ask you for
Government photo ID for every borrower
The signed agreement of purchase and sale for your new home
The signed agreement of purchase and sale for your current home, with proof that conditions are removed
Your current mortgage statement and property tax bill
Proof of income, plus mortgage approval or pre-approval for the new home if you have it
Your options
Which kind of lender fits you
Option 1
Bank bridge financing
Often tied to the new mortgage with that bank, and usually the cheapest option if you qualify.
Option 2
Private or alternative bridge loan
More flexible on timing and conditions, with higher fees. Plan the repayment date carefully.
Option 3
Home equity line of credit (HELOC)
If you already have one, you may be able to use it for the deposit or the gap.
Option 4
Negotiate the closing dates
Matching or overlapping the closing dates can avoid the need for a bridge at all, and sometimes costs less.
Avoid these
Common mistakes
!Buying before the sale of your current home is firm and relying on a bridge to rescue you.
!Underestimating the cost: interest, the lender fee and legal fees can add up quickly on a short loan.
!Not planning what happens if your sale falls through or closes late.
!Forgetting about carrying costs: two mortgages, two sets of property tax and insurance and utilities until the sale closes.
Take action
Your first steps
1Confirm your closing dates and how many days or weeks apart they are.
2Gather both agreements of purchase and sale, ID, your mortgage statement and income proof.
3Ask your own bank whether it offers bridge financing with your new mortgage.
4Start the intake so a broker can compare bank, alternative and private bridge options.
5Plan for the worst case: what you will do if the sale is delayed, and get independent legal advice before you sign.
The intake
What your application will ask
Your online application goes one topic at a time and saves every answer and document as you go, so you can stop and come back. It never runs a credit check, and a licensed mortgage professional reviews it and follows up.
For bridge financing borrowers
When does the purchase of your new home close, and when does your current home sell? Are all conditions removed on both?
What is the value of your current home, what is owed on it, and what is the price of the new home?
How much do you need to borrow, and for how many days or weeks?
Do you already have a pre-approval or mortgage approval for the new home?
Plus the basics everyone answers 13
Your full name, email, mobile number and the best time to call.
The city you live in, and whether you are a Canadian citizen, permanent resident, or other status.
Are you applying alone or with someone else? If with someone, their name and how you are related.
Your goal: buy, refinance, renew, take out equity, or consolidate debt?
The property type (house, condo, multi-unit) and the city it is in.
Will you live in it, rent it out, or both?
The purchase price or estimated value, and your target closing or renewal date.
Your down payment or available equity, and where it comes from (savings, RRSP/FHSA, a gift, sale of another property).
Your approximate yearly household income before tax.
Your monthly debt payments: car loans, credit cards, lines of credit, student loans, support payments.
Your own estimate of your credit score: excellent, good, fair, poor, or not sure.
In the last 7 years, any bankruptcy, consumer proposal, collections, or missed mortgage payments?
May the broker contact you? (A credit check is only ever run later, with your separate written consent.)
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Answers
Questions people ask
What is a bridge loan?
A short-term loan that covers the gap between buying a new home and receiving the proceeds from selling your current one. It is repaid when the sale closes.
Who qualifies for bridge financing?
Usually homeowners with a firm sale agreement on their current home and enough equity. Lenders also look at the new mortgage approval, income and credit.
How long can a bridge loan last?
Typically from a few days to a few months. The shorter the better, since the loan costs more than a regular mortgage.
What does bridge financing cost?
Interest for the days you borrow, usually a lender or administration fee, and legal costs. Ask for the total in writing for the exact number of days you need.
What if my sale falls through?
The bridge loan still has to be repaid. That is why lenders want an unconditional sale, and why you should have a backup plan, such as a lender extension or refinancing, before you commit.
Does starting the intake affect my credit?
No. It is only questions. A credit check, if needed, comes later and only with your permission.
General information, not mortgage, legal or tax advice. Lender rules change and every application is reviewed on its own facts. Your application and documents are stored privately and go only to a licensed mortgage professional at Top Mortgages Inc; they are never sold, and no credit check is run without your separate written consent.