Bridge Financing in Canada 2027: How It Works, Costs, and When to Use It

Bridge financing (also called a bridge loan or swing loan) is a short-term loan that lets you purchase a new home before the proceeds from selling your current home are available. It bridges the gap between the two closings. The lender advances the net equity from your existing home — the estimated sale proceeds minus your current mortgage balance — as a short-term loan that is repaid when your home sells. Most Canadian banks offer bridge financing to existing mortgage clients who have a firm sale agreement on their current property. Without a firm sale, most lenders will not approve a bridge loan. The FCAC mortgage borrower guide covers short-term financing options.

Bridge financing is more expensive than a standard mortgage. Typical costs: (1) Interest rate: prime rate + 2–3% (with the Bank of Canada overnight rate at current levels, this translates to approximately 7.5–9% annual rate in 2027); (2) Administration fee: $200–$500 per bridge loan; (3) Legal fees: your lawyer registers the bridge loan against the old property — typically $300–$600 additional; (4) Daily carrying cost: for a $200,000 bridge at 8.5% — approximately $46/day. Most bridge loans run 30–90 days. A 60-day bridge on $200,000 at 8.5% costs approximately $2,795 in interest plus fees. Costs are modest relative to the convenience and flexibility a bridge provides — but they add up if your property sale is delayed. Use the Canadian mortgage calculator to model your combined carrying costs.

Yes — virtually all Canadian A lenders (banks, credit unions) require a firm and unconditional Agreement of Purchase and Sale (APS) on your current home before approving bridge financing. A conditional sale (subject to financing, inspection) does not qualify. This protects the lender: if your sale falls through, the lender needs the equity in your current home as security. If you do not yet have a firm sale, your options are: (1) sell your current home first and use temporary rental housing during the gap; (2) include a home sale contingency in your purchase offer; (3) use a HELOC on your current home if available; (4) seek private bridge financing (higher rates, 10–15%, but available without firm sale). The sell and buy simultaneously guide compares all options.

If your existing home has not sold before the bridge loan term expires, you have several options — none of them ideal: (1) Bridge loan extension: most lenders will extend the bridge for an additional 30–60 days with additional fees and documentation — available if you still have a firm sale or can demonstrate active marketing; (2) Convert to a second mortgage: the lender converts the bridge balance to a short-term second mortgage at higher cost; (3) Private refinance: replace the expired bridge with private financing at higher rates; (4) Price reduction: if the sale is stalled due to price, a reduction may be more cost-effective than carrying the bridge longer. To minimize bridge loan risk: set a realistic sale price from the start, list immediately after your purchase offer is firm, and build a 30-day buffer into your bridge loan term. The CMHC home-buying guide covers financial planning during transitions.

All five major Canadian banks (TD, RBC, BMO, Scotiabank, CIBC) offer bridge financing, but typically only to borrowers who are also placing their new mortgage with the same institution. This creates an incentive to consolidate — the bank provides the bridge and the new purchase mortgage as a package. Credit unions and some monoline lenders also offer bridge financing. Conditions vary: maximum bridge loan amount (often capped at $750,000–$1.5M), maximum term (usually 90–120 days), and whether the new home mortgage must be with the same lender. If you are switching banks for your new mortgage, confirm bridge financing availability before committing — some banks will not provide a bridge loan unless you bring both the bridge and the new mortgage to them. Check with your mortgage broker to find the best package deal. See the mortgage broker guide for how brokers can structure bridge + new mortgage packages.

A HELOC and a bridge loan serve similar purposes — both provide access to your home equity before the sale closes — but they differ in structure: (1) HELOC: revolving line of credit; requires prior setup (approved and registered before you need it); interest-only; can be drawn and repaid flexibly; ongoing availability makes it more versatile; rates are typically prime + 0.5–1%; (2) Bridge loan: single-draw short-term loan; can be arranged at the time of the new purchase; repaid in full at the closing of your sale; slightly higher rate than a HELOC. The HELOC is better if you already have one in place — you draw from it, then repay after your sale closes at lower cost. The bridge loan is the only option if you do not have a HELOC already registered. See the Canada HELOC guide for HELOC setup and usage details.