Editor's note, October 6, 2026: this article was reviewed and rewritten in our accuracy check. An earlier version contained interest rates, fees and lender limits we could not trace to a published source; they have been removed or replaced with figures from the sources listed at the end of the article.
When you are selling one home and buying another, the two closings rarely fall on the same day. If your purchase closes before your sale, you need the equity from the home you're selling a little early. A bridge loan is a short-term loan for exactly that gap.
How it works
You sell your current home firm (all conditions removed) with a closing date after your purchase. Your lender advances part of the equity you will receive from the sale so you can close on the new home. When the sale closes, your lawyer uses the proceeds to repay the bridge loan. Example: your sale closes on July 30 and your purchase on July 15; the bridge covers the 15 days in between.
What lenders usually ask for
- A firm agreement of purchase and sale on the home you're selling, with conditions waived.
- A firm agreement on the home you're buying.
- A mortgage approval on the new home; bridge loans are usually offered by the lender providing the new mortgage.
- A calculation of your net proceeds: the sale price less your current mortgage payout, any prepayment penalty, commission and legal costs.
Lenders set their own maximum amount and term, and price the loan at their own rates and fees. Ask for the rate, any setup fee and the maximum term in writing, and ask your lawyer what they charge to handle it.
How to estimate the cost
Interest on a bridge loan is charged for the days it is outstanding: amount × annual rate × days ÷ 365, plus any fee. As an illustration only, $300,000 for 15 days at an annual rate of 8% would be about $986 of interest. Use the rate your lender actually quotes.
When you need one, and when you don't
- You need one if your purchase closes before your sale and you can't fund the down payment from savings.
- You don't if the sale closes first or on the same day. Many sellers negotiate the closing dates so the sale closes a day or two before the purchase.
- You can't get a typical bridge loan if you haven't sold firm yet. Buying first without a firm sale is a bigger risk: you could end up carrying two homes.
Alternatives
- Align the closing dates when you negotiate either deal.
- A home equity line of credit on your current home, if you already have one. At federally regulated lenders, revolving HELOC credit is limited to 65% of the home's value.
- Porting your mortgage to the new home, if your mortgage allows it, can avoid a prepayment penalty on the old one. Check your mortgage terms and the penalty rules described by the Financial Consumer Agency of Canada.
- Selling first and renting briefly removes the risk of owning two homes.
Risks to manage
- If your buyer fails to close, you still owe the bridge loan and have two homes to carry. Your agreement's deposit and your lawyer's advice matter here.
- If the sale closing is delayed, the bridge stays outstanding longer; ask what happens past the agreed term.
- Your new mortgage is approved on the basis that the old one will be paid off. Don't take on new debt in between.
Planning a move-up? Talk to a licensed Summitly agent about timing your sale and purchase, or ask Zara, Summitly's AI virtual agent. Mortgage financing is arranged through our partner, Mortgage Squad Advisors.
