What is it?
Bridge financing is a short-term loan that acts as a "bridge". You use it when you are selling your current home and buying a new one, and the new home closes (you pay the balance and take ownership) before your current home closes. The money from your sale has not arrived yet, but the down payment and balance on the new home are due, so the bank lends you the gap.
The equity in your current home (its value minus the mortgage still owing) backs the loan. When your current home closes, the sale proceeds pay off the bridge loan plus interest. It is usually arranged with the same lender as the mortgage on the new home, as a separate loan.
When do you need it?
- You bought the new home first, sold your current home later, and could not line up the two closing dates.
- You want the new home a few days or weeks early on purpose, for moving or renovations, so the two homes overlap.
- The buyer of your current home asked for a long closing, pushing the date back.
- RECO’s seller’s checklist also tells sellers to think ahead about whether the closing date on their sale lines up with the next home, and to have a contingency plan if the dates do not match.
What do you need to qualify?
The key requirement is a firm sale agreement on your current home. A deal that still has conditions (financing, inspection and so on) is usually not enough, because the lender wants to know the sale money is coming on a set date. RBC’s page states that a firm sale agreement must be in place.
Lenders typically check the sale agreement for your current home (price, closing date), the purchase agreement for the new home and the balance of the mortgage on your current home. Other documents and lending rules vary by lender, so ask your mortgage specialist.
According to RBC, terms are typically six months but can range from 90 days to 12 months or longer. In practice most people only use it for the days between the two closings. Maximum terms and amounts differ by lender.
What does it cost?
The interest rate on a bridge loan is usually higher than on a regular mortgage. RBC’s page notes that interest can be more expensive than conventional financing. Interest is normally calculated for the number of days from the day you borrow to the day you repay.
Some lenders also charge an administration or set-up fee on top of the interest. Whether there is a fee and how much differs by lender, so confirm in advance. Your lawyer handles both closings, so budget for legal fees too.
The exact rate, fee and maximum amount are set by each lender, not by law. Get them in writing before you sign.
Example
The interest rate below is only to show the math. The real rate is set by the lender.
| Item | Detail |
|---|---|
| New home closes | June 1 |
| Current home closes (firm deal) | June 30 |
| Sale proceeds needed for the new down payment | $300,000 |
| Bridge loan amount | $300,000 |
| Length | 29 days |
| Interest (example 8% per year) | $300,000 × 8% × 29 ÷ 365 ≈ $1,907 |
| Set-up fee (varies by lender, example) | $500 |
| Rough total cost | About $2,400 |
Estimate for reference only. When the current home closes on June 30, the lawyer repays the $300,000 bridge loan plus interest from the sale proceeds first and sends you the rest.
What to watch out for
- If your sale is not firm, you may not get a bridge loan. Before you go firm on the new home, confirm with your lender that bridging is available. RBC’s page suggests checking your eligibility before you start house hunting.
- If the buyer of your current home fails to close, the sale money does not arrive, but the bridge loan still has to be repaid. Tell your lawyer and lender right away, and talk to your lawyer about the deposit and any claim for damages.
- On the new home’s closing day you need more than the down payment: land transfer tax, legal fees and adjustments (statement of adjustments) are due the same day. Include them when you set the bridge amount.
- The deposit paid by the buyer of your current home is usually held in trust (often by the brokerage) until closing, so you cannot use it.
- While you own both homes, you pay mortgage interest, property tax, insurance and any condo fees on both. Keep the overlap short.
- If the term ends and your current home has still not closed, the lender may change the terms or demand repayment. Read the term and extension rules in the loan documents.
Alternatives to a bridge loan
- Line up the closing dates: when you write the offer on the new home, set its closing for the same day as your sale or a few days later. On a same-day closing your lawyer receives the sale money and sends it on for the purchase (the order of the two closings that day matters).
- Sale-of-buyer’s-property condition: add a condition to the new-home offer that the deal depends on your current home selling by a set date. Sellers may refuse it, and it is a weak condition in a competing-offer situation.
- Sell first, then buy: sell your current home with a long closing and look for the new home in between. No bridge is needed, but if you do not find a home in time you may need to rent temporarily.
- A HELOC (home equity line of credit) on your current home opened in advance is another route, but it must be paid off when the home sells and lenders may not approve a new line on a home that is listed for sale. Ask your lender early.
Pre-construction and condos
If you plan to sell your current home to pay the final balance on a pre-construction condo, lining up dates is harder because the builder sets the final closing date and it can change. For a condo with interim occupancy and a separate final closing, you can only plan a bridge loan once the final closing date is confirmed.
When buying a resale condo, you may also end up writing the new-home offer before your own sale is firm. Plan the order of events with your agent, lawyer and mortgage specialist ahead of time.
What the law and official sources say
Quotes are copied word for word. The "In plain words" lines are our explanation, not an official translation.
A bridge loan is a temporary financing option. It is designed to help homeowners “bridge” the gap between the sale of an existing home and the purchase of a new one. You can use the equity in your current home for the down payment on your next property while you wait for your home to sell.In plain wordsA bridge loan lets you borrow against the equity in your current home to cover the new home’s down payment until your sale money arrives.
Source: rbcroyalbank.com/mortgages/bridge-financing.html · checked Oct 31, 2026
Bridge loan terms are typically six months but can range from 90 days to 12 months or longer. To qualify for a bridge loan, a firm sale agreement must be in place on your existing home.In plain wordsAt this lender, terms are typically six months and can run from 90 days to 12 months or longer, and you need a firm sale agreement on your current home. Other lenders may differ.
Source: rbcroyalbank.com/mortgages/bridge-financing.html · checked Oct 31, 2026
Interest can be more expensive than conventional financing … Can be a higher risk. That’s because you’re taking on a new loan with typically a higher rate and no guarantee that your home will sell during the termIn plain wordsInterest can be higher than a regular mortgage, and it is extra debt at a higher rate with no guarantee the sale will complete within the term.
Source: rbcroyalbank.com/mortgages/bridge-financing.html · checked Oct 31, 2026
If you’re purchasing another home, does the closing date on the sale of your current home align with your next home? Have a contingency plan in place in case the dates don’t match up.In plain wordsRECO tells sellers who are also buying to check whether the two closing dates line up and to have a backup plan (such as bridge financing or adjusting dates) if they do not.
Source: reco.on.ca/consumers/information-for-sellers/sellers-checklist/ · checked Oct 31, 2026
Common questions
Can I get a bridge loan if my current home has not sold yet?
Usually not. Lenders require a firm sale agreement on your current home. A conditional deal or a home that is only listed is generally not enough. Rules differ by lender, so ask your mortgage specialist.
What is the interest rate on a bridge loan?
There is no set rate; each lender decides. It is usually higher than a regular mortgage, and you pay interest only for the days you borrow. Some lenders also charge a set-up fee. Get the terms in writing.
Where do I get a bridge loan?
Usually from the lender giving you the mortgage on the new home. When you get your mortgage pre-approval, ask whether bridging is available in case the closing dates do not line up.
Can I use the deposit from my sale toward the new home?
No. The buyer’s deposit is usually held in trust (often by the brokerage) until closing. It only becomes part of your sale proceeds on closing day.
Is there a way to avoid a bridge loan?
You can set the new home’s closing date on or after your sale closing, sell first with a long closing, or add a sale-of-your-home condition to the new offer. Each has trade-offs, so talk them through with your agent.
Guides that use this term
Sources checked
- RBC Royal Bank, How bridge financing can help you buy first and sell later (lender page, not law) · checked Oct 31, 2026
- RECO, Seller’s checklist · checked Oct 31, 2026