Bridge Financing in Canada: How It Works and Calculator

Estimate how much you need to borrow and what your bridge loan could cost. Enter your expected borrowing period, quoted interest rate and applicable fees.

Borrow only the amount needed to complete your purchase, not automatically all the equity available from your sale.

Total interest is the estimated charge for borrowing the money over the selected number of days.

Total fees include the lender, legal and other bridge-related fees you enter.

Total borrowing cost is the interest plus fees. It does not include repayment of the amount borrowed.

Net funds available for closing is the amount you receive after any fees deducted from the advance.

Estimated repayment amount is the outstanding principal plus interest and fees still payable at repayment. Fees already paid should not be included again.

Check the amount you will actually receive. A $100,000 loan does not necessarily provide $100,000 for your purchase if fees are deducted before funding. RMG, for example, states that its processing fee is deducted from the bridge advance.

The calculator assumes a constant loan balance and interest rate unless otherwise indicated. Actual charges can differ because of fee treatment, rate changes, minimum interest charges, payment timing and the lender's calculation method. Use your written loan quote to confirm the final cost.

Bridge financing is a short-term loan that helps you buy your next home before receiving the proceeds from selling your current home. It covers a funding gap when your new home closes before the sale of your existing home closes, allowing you to access equity that would otherwise remain tied up in your property.

For standard bank bridge financing, your existing home generally needs to have a firm sale agreement. This means you have an accepted agreement with no outstanding purchase conditions, but the sale has not yet closed. Having your home listed for sale, or accepting an offer that still has conditions, is not necessarily enough to qualify.

A bridge loan temporarily provides funds for your new purchase while you wait for the proceeds from an agreed sale.

Your lender and lawyer coordinate the advance so the money is available for the new home's closing. When the existing home's sale closes, the required sale proceeds are directed toward repayment of the bridge loan and amounts owing under the loan agreement.

Suppose your new home closes on October 5, but the sale of your current home closes on November 4.

You need $100,000 from the sale to complete your purchase. A bridge loan could provide that money for the 30-day gap, subject to approval. When your existing sale closes, the proceeds are used to repay the bridge.

An overlap can also give you time to move, clean or make improvements before leaving your old home. However, you still need to meet the possession and closing obligations in both agreements. Bridge financing does not let you remain in your existing home indefinitely.

There are two separate amounts to consider:

Maximum available: The amount your lender is prepared to advance after reviewing your sale equity, purchase requirements and lending limits.

Amount actually needed: The cash shortfall you must cover to complete your new purchase.

These amounts are not necessarily equal. Some lenders calculate their maximum using both the equity available from the sale and the funding needed for the purchase. RMG, for example, publishes a maximum based on the lower of a purchase-funding calculation and a sale-equity calculation.

Start with the agreed sale price, not simply your asking price or estimated market value.

Estimated net sale proceeds = sale price − secured-debt payouts − selling costs

Use the expected payout amounts for your mortgage and other debts secured against the property. Selling costs may include real estate commission and applicable taxes, legal fees, mortgage prepayment charges and discharge costs. Your lender may apply its own closing-cost allowance or other limits.

Estimated net sale proceeds are not a guaranteed bridge-loan approval.

Determine how much cash remains due on your new purchase after accounting for your new mortgage and any deposit already paid.

Amount needed = remaining purchase-closing funds required − other usable cash

Do not count a deposit already paid as cash you still have available. Similarly, avoid counting money reserved for other expenses as available toward the purchase.

Assume the following amounts, and suppose the lender confirms a maximum bridge advance of $150,000.

Although the homeowner expects $300,000 in net sale proceeds and has access to a $150,000 bridge limit, the purchase shortfall is only $100,000.

This example assumes bridge-specific fees are paid from separate funds. If fees are deducted from the advance, additional cash or a larger approved loan may be needed to cover the same purchase shortfall.

Bridge financing does not have one standard interest rate or fee schedule across Canada. TD describes its bridge rates as similar to open mortgage rates, which are higher than mortgage rates on existing closed mortgages. As another example to get a ballpark idea, CMLS's bridge calculator displays an initial rate of prime plus four percentage points.

When comparing quotes, ask for the annual rate, all fees, the net amount advanced and the amount due at repayment. Also ask whether interest can change during the term and whether early repayment, minimum interest or extension charges apply.

For a simple estimate using daily interest:

Interest = loan amount × annual interest rate × number of days ÷ 365

Express the annual interest rate as a decimal when using this formula. For example, 8% becomes 0.08.

Then calculate:

Total borrowing cost = interest + lender fee + additional legal fee + other bridge-related fees

This estimate assumes a constant rate and balance, a 365-day year and no additional minimum-interest requirement.

Assume a $100,000 loan at 8.00% annually, with a $500 lender fee and a $500 additional legal fee.

These are illustrative assumptions, not a current lender quote. Fees are paid separately and are not added to the interest-bearing loan balance.

For the 30-day loan:

$100,000 × 0.08 × 30 ÷ 365 = $657.53 in interest

At this balance and rate, each additional day adds approximately $21.92 in interest.

If the $1,000 in fees is paid upfront and all interest is payable at repayment, the amount due after 30 days would be $100,657.53. The total borrowing cost would still be $1,657.53, including those upfront fees.

These figures exclude ordinary mortgage payments, property taxes, insurance, utilities and other costs of owning both homes.

Prepare the purchase and sale agreements, documents showing any conditions have been removed, mortgage payout information, proof of the purchase deposit and estimated selling costs. Your lender may also require insurance confirmation and other supporting documents. Requirements differ by lender.

Ask about the bridge when arranging your new mortgage. Some lenders tie eligibility to the financing on your next home rather than offering a standalone bridge. TD, for example, requires approval for a TD mortgage or Home Equity FlexLine on the new property.

You may need a different lending arrangement rather than a standard bank bridge.

A private mortgage lender may consider financing based on your property, available equity and repayment plan. However, private financing carries higher interest rates and fees, and owning a valuable property does not make borrowing risk-free.

Before accepting private financing, ask how you would repay the loan if your home takes longer to sell or sells for less than expected. Also confirm whether the new mortgage lender will accept the proposed source of funds.

A firm sale is not a guarantee that the buyer will complete the transaction on time. If the expected sale proceeds do not arrive, you remain responsible for the bridge loan.

Depending on your circumstances and lender, you may need an approved extension, refinancing or private financing. These options can involve additional qualification requirements and costs, and none should be assumed to be available. Contact your lender and lawyer promptly if a closing problem develops.

Using the $100,000 example above, a 14-day delay at the same 8% rate adds $306.85 in interest, before any extension fees.

During the overlap, budget for your existing mortgage, if any, your new mortgage and the expenses associated with both properties. If the sale fails, these overlapping obligations still continue while you arrange a solution.

Private financing may provide an alternative when other options are unavailable, but higher fees, additional interest and repayment conditions can make a short-term problem more costly. Understand the consequences of missed payments and what happens at maturity before signing.

A useful affordability check is to calculate the expected bridge cost and then repeat it with a longer borrowing period. Leave room in your budget for delays rather than assuming everything will close exactly as planned.

Bridge financing is one way to manage a move, but it is worth comparing other arrangements.

Ask whether the purchase or sale closing date can be adjusted so your sale proceeds are available before your new purchase needs to be funded. This may eliminate the gap or reduce the number of borrowing days.

For same-day closings, have your lawyer confirm how the funds will move between transactions and what backup arrangements are needed. Matching dates alone does not establish that the money will arrive in the required order.

An existing home equity line of credit may provide funds for the temporary shortfall. Compare its HELOC interest rate and fees with the bridge quote.

A HELOC requires regular payments, and a HELOC secured against the property being sold must be repaid when that property is sold. Setting up a new HELOC can also involve qualification requirements, a home appraisal, legal work and other fees. It should not be assumed to be an immediate or automatically cheaper solution.

Porting or transferring a mortgage may allow you to retain your existing rate and remaining term on the transferred balance and avoid prepayment charges.

However, porting does not necessarily eliminate the need for a bridge loan. A delayed or reverse port may still require bridge financing for the down payment or closing costs. Treat porting as part of your overall mortgage plan, not a guaranteed replacement for temporary funding.

A sale-of-property condition can make your new purchase conditional on selling your current home within an agreed period. The seller must accept the condition, and its protection depends on the wording and deadlines.

A condition requiring a firm sale does not necessarily require that sale to close before the purchase. Have your lawyer review whether the clause addresses the actual funding risk and how any seller escape clause operates.

A rent-back or post-closing occupancy arrangement may let you close your sale, receive the proceeds and remain temporarily in the property until your next home is ready.

The buyer must agree, and the arrangement needs careful documentation covering payment, occupancy dates, insurance, responsibilities and what happens if you do not leave on time.

Payment arrangements depend on the loan agreement. RBC describes repayment of the bridge and interest from sale proceeds. Private mortgages may require interest-only payments or may add interest and fees to the amount due at maturity.

Confirm the exact schedule rather than assuming every bridge loan has no interim payments.

There is no single timeline that applies to every application. Ask your lender for its approval, document and funding deadlines, and involve your lawyer early.

Having an approval is not the same as having funds ready to close: supporting documents and funding conditions still need to be completed.

Not necessarily. Compare the total cost for the amount and time you need, including setup, legal and discharge fees.

An existing HELOC may avoid some setup expenses, while establishing a new one can add costs. A lower annual rate does not automatically produce a lower total cost over a short borrowing period.

Borrowing less or reducing the number of borrowing days lowers interest. Fixed fees can still make up a significant share of the cost, especially for a small or very short loan.

For example, reducing a $100,000 bridge with an 8% rate from 60 days to 30 days saves approximately $657.53 in interest, assuming the rate and fees remain unchanged.

No. It provides temporary funds toward the purchase while you wait for your home to be sold. Your new mortgage provides the longer-term financing, while the bridge is repaid from the sale.