Bridge Financing Between Real Estate Closings in Ontario: What You Need to Know

You have found your next home and firmed up the purchase — but your current home will not close until two weeks after your new one. You need the equity from your sale to complete the purchase, but the money will not be in your hands in time. This is the gap that bridge financing is designed to fill. It is common in Ontario real estate, but it comes with costs, conditions, and risks that every buyer should understand before signing.

What Is Bridge Financing?

Bridge financing (also called a bridge loan) is a short-term loan provided by a lender — usually the same bank that holds or is providing your new mortgage — to cover the gap between your purchase closing date and your sale closing date.

The bridge loan essentially advances you the net proceeds you expect to receive from your sale, so you can complete your purchase on time. Once your sale closes and funds are received, the bridge loan is repaid.

Example: Your new home closes June 1. Your current home closes June 15. You need $200,000 from your sale proceeds to complete the purchase. Your lender provides a bridge loan of $200,000 for 15 days. On June 15, your sale closes, the net proceeds flow to the lender, and the bridge is discharged.

When Is Bridge Financing Available?

Not every situation qualifies. Most lenders require:

1. A firm, unconditional sale agreement on your current property — not just a listing, and not a conditional deal. The lender needs certainty that your sale will close.
2. A confirmed new mortgage approval for the purchase property.
3. The same lender for both the bridge and the new mortgage in most cases (though some lenders allow you to bridge through a different institution).

If your sale is still conditional or has not happened yet, bridge financing is typically not available. This is a critical planning point: if you are buying before you have sold, you need to think carefully about whether you will qualify for a bridge.

How Bridge Loans Are Structured

Interest rate

Bridge loans almost always carry a higher interest rate than a standard mortgage — as of writing, rates are typically prime plus a premium, but rates change with market conditions. Always confirm the current rate with your lender before assuming the cost is negligible.

Administration fees

Most lenders charge a flat setup fee for a bridge loan in addition to interest. As of writing these fees vary by lender and loan size — ask for the full cost disclosure before agreeing.

Term

Bridges are short-term by design — typically from a few days to a few months. Most lenders cap bridge loans at 90 to 120 days. If your sale is more than that far away, a bridge may not be available, and you may need to rethink your timeline.

Security

The bridge loan is typically secured against your current property (the one being sold). The lender registers a mortgage or charge against it for the bridge amount.

The Legal Mechanics: Your Lawyer's Role

Your real estate lawyer plays a crucial role in a bridged transaction:

1. Receives bridge funds from the lender and holds them in trust alongside your down payment funds.
2. Applies the combined funds to complete your purchase closing.
3. On your sale closing, receives the net proceeds and repays the bridge lender out of trust as part of the closing disbursements.
4. Confirms the discharge of the bridge loan security from your sold property as part of the title transfer.

This means your lawyer is handling two closings in close sequence — sometimes on the same day — and must carefully manage the flow of funds between them. Clear communication between your lawyer, your mortgage lender, and the bridge lender is essential.

Risks and Things That Can Go Wrong

Your sale falls through

If your sale does not complete — because the buyer defaults, the deal falls apart, or closing is delayed significantly — you are stuck with the bridge loan outstanding but without the proceeds to repay it. You would need to either extend the bridge (at continued interest cost) or arrange alternative refinancing. This is a serious financial risk.

Interest costs add up quickly

If your bridged gap is supposed to be two weeks but your sale closing is delayed for any reason, every extra day costs bridge interest at the higher rate. On a $300,000 bridge at a meaningful rate, even a few extra weeks adds up.

Lender pulls the bridge

In rare cases, if your financial situation changes before the purchase closes (job loss, credit issue), the lender could revisit their willingness to extend bridge financing. This is uncommon but not impossible.

Overlapping closings on the same day

If both closings are scheduled for the same day, the sequencing matters: your sale must close and fund before or simultaneously with your purchase. In practice, two same-day closings require very careful lawyer-to-lawyer coordination and carry more risk than a genuine gap of several days.

Alternatives to Bridge Financing

• Negotiate matching closing dates — if both deals are in progress simultaneously, try to align the closing dates so you do not need a bridge at all. This is the simplest solution.
• Rent temporarily — sell first, close the purchase later, and rent in between if the timing gap is large.
• Unsecured line of credit — for smaller gaps, some buyers use an existing line of credit. Rates and limits vary.
• Borrow from family — an informal loan from a family member can bridge a short gap, but document it properly and discuss the tax implications with your accountant.

Frequently asked questions