What is bridge financing and when would I need it as a buyer in Ontario?

Bridge financing is a short-term loan that covers the gap when you are buying a new property before you have received the proceeds from selling your existing one. It most commonly arises when your purchase closing date is before your sale closing date — you need funds to close the new purchase before your sale closes and releases funds.

For example, if you are purchasing on the first of the month but your current home does not close until two weeks later, your lender can provide bridge financing to cover the gap. The loan is usually for a few weeks and is automatically repaid from the sale proceeds once your existing property closes. Interest rates on bridge loans are typically higher than on standard mortgages, and lenders usually require that you have a firm sale (no conditions remaining) before they advance bridge funds.

Your real estate lawyer coordinates with your lender on both transactions to ensure the timing and funding flows are managed correctly. If you are simultaneously buying and selling, tell your lawyer both closing dates as early as possible.