When you need a bridge loan
Toronto closings rarely line up perfectly. Bridge financing is the standard answer when your purchase closes days or weeks before your sale, when a builder's closing date will not move, or when you want to renovate a new home before moving out of the old one.
- Purchase closes before the sale of your current home
- Builder or new-build closing date cannot be extended
- You want possession early to renovate before moving
- A deposit is needed before your equity is released
Bank bridge financing
If your existing home is sold firm with conditions waived, most lenders will bridge the equity you are relying on for the purchase. The loan is typically interest-only at prime plus a premium, with a modest administration fee and legal cost. It is repaid in full on the day your sale closes. A firm sale agreement is almost always required.
Private bridge financing
When your home is not sold yet, banks will not bridge it. A private lender will, secured against one or both properties, on the strength of the equity rather than the sale agreement. Cost is higher and there is a lender fee, but it can be arranged in days and it keeps a purchase from collapsing.
What a bridge actually costs
Expect interest for the days you hold it, a lender or administration fee, and your lawyer's cost to register and discharge. On a short bank bridge the total is usually modest relative to the alternative, which is a failed closing, a lost deposit, or a rushed price cut on your sale.
Frequently asked questions
- How long can bridge financing last in Ontario?
- Bank bridge loans typically run up to 90 or 120 days and are repaid when your sale closes. Private bridge financing can be arranged for six to twelve months when more time is needed.
- Can I get bridge financing if my home has not sold?
- Not from most banks - they require a firm, unconditional sale. A private lender can bridge an unsold property using the equity in it, at a higher rate and with a lender fee.
- How much does bridge financing cost in Toronto?
- Bank bridges are usually interest-only at a premium over prime plus an administration fee and legal costs. Private bridges cost more and carry a lender fee, but can be arranged in days.
- How fast can a bridge loan be arranged?
- A bank bridge can often be added within a few business days when the purchase mortgage is already approved. Private bridge financing can fund in as little as 48 to 72 hours on a clean file.
- Can I bridge a new construction closing?
- Yes. Builder closings that will not move are one of the most common reasons Toronto buyers need a bridge.