What is bridge financing when I am selling one home and buying another in Ontario?

Bridge financing is a short-term loan that allows you to close on your new home purchase before the sale of your existing home completes, bridging the gap when the two closing dates do not overlap. Ontario lenders typically offer bridge loans once you have a firm sale in place.

The loan covers the down payment you need for the new purchase, using the equity in your existing home as security. Interest accrues daily from when the bridge loan is drawn until your existing home closes and the proceeds repay it. Bridge financing costs money, so minimizing the gap between your sale and purchase closing dates reduces the expense.

Most lenders require a firm, unconditional sale agreement before approving a bridge loan — a conditional sale usually does not qualify. If your sale falls through while you are already in your new home, you could be left holding two mortgages simultaneously. Your mortgage lender and real estate lawyer should be involved early when you are coordinating two transactions so all the moving parts — bridge loan approval, closing date alignment, and fund flow — are planned carefully.