What Is Bridge Financing and How Does It Work in Ontario?

Bridge financing is a short-term loan that covers the gap between two closing dates: the date you take possession of your new home and the date you receive proceeds from the sale of your old one.

This situation comes up most often for move-up buyers who purchase their next home before their current home has sold — or who have sold but have a closing date mismatch where the purchase closes first.

How Bridge Financing Works

If your new home closes on June 1st and your condo sale closes on June 30th, you need to fund the purchase on June 1st without having the sale proceeds yet. Your lender advances the difference between what you owe on your new home and what's coming from the sale — effectively bridging the gap. When your condo closes on June 30th, you repay the bridge loan with the proceeds.

The loan amount is typically the equity from your existing property (sale price minus mortgage payout), not the full purchase price of the new property. Your regular mortgage covers the rest.

What It Costs

Bridge financing in Ontario typically carries an interest rate of prime plus 2–3%, charged on the outstanding balance for the number of days the bridge is active. Most lenders also charge an administration fee in the $500–$2,000 range.

Example: If you're bridging $200,000 in equity for 30 days at prime (currently around 5.2%) plus 2.5% = 7.7% annualized:

• Daily rate: 7.7% ÷ 365 = 0.0211%
• 30-day cost: $200,000 x 0.000211 x 30 = approximately $1,264
• Plus admin fee: $500–$2,000
• Total approximate cost: $1,764–$3,264 for a 30-day bridge

For a 60-day bridge, roughly double the interest cost. For a 90-day bridge, triple. These are manageable numbers if the bridge is planned — and significant if it's a surprise.

Who Offers Bridge Financing

Most major Canadian banks and many credit unions offer bridge financing as part of their mortgage product suite. Monoline lenders typically do not. If you're using a broker, confirm early whether your lender offers this product — not all do.

Key requirement: in most cases, you need a firm agreement of purchase and sale on your existing property before the lender will approve bridge financing. A conditional offer or a listing without an accepted offer is not sufficient. This is the most common point of confusion for buyers who think they can buy first and bridge without a firm sale in hand.

When Bridge Financing Makes Sense

Bridge financing works well when:

• The gap between closing dates is short (under 90 days)
• You have a firm sale on your existing property
• The carrying cost is predictable and accounted for in your move-up budget
• You're targeting a property type (e.g., competitive freehold) where a sale condition would significantly weaken your offer

It's not a solution for:

• Situations where your current property hasn't sold and you need financing to proceed
• Extended gaps of 120 days or more (cost and lender appetite increase significantly)
• Cases where your equity margin is thin and a price reduction on the sale would affect your ability to close

The Takeaway

Bridge financing is a practical, widely available tool for managing closing date mismatches in a move-up transaction. The key is knowing the cost, confirming your lender offers it, and not assuming you can access it without a firm sale.

If you're planning a move-up in Toronto and working through the sequencing question, the Should You Sell First or Buy First? post covers how bridge financing fits into the broader decision.