UNDERSTANDING HOW BRIDGE FINANCING WORKS

Real estate timelines don’t always line up perfectly. When the purchase of a new home closes before the sale of the current one, the down payment funds may not be available in time — and that’s where bridge financing becomes essential.

Here’s how bridge loans work and when they can save the day 👇

1️⃣ Bridge financing fills the gap between two closing dates

A bridge loan provides short-term access to the down payment from the equity in the home that has been sold.

✔️ purchase closes earlier

✔️ sale closes later

✔️ funds are needed before proceeds arrive

This short-term loan covers the gap so the new purchase can close smoothly.

2️⃣ Bridge loans have two main costs

The cost structure is simple and predictable:

✔️ interest rate — usually Prime + 2.5%

✔️ administration fee — generally $200 to $695 depending on lender

These costs apply only for the short period the loan is needed.

3️⃣ Calculating the amount available is straightforward

Lenders follow a standard formula:

Sale price

➖ estimated closing costs (approx. 7%)

➖ new mortgage amount

= eligible bridge financing amount

Closing costs include legal fees, land transfer taxes, realtor commissions, title insurance and any applicable appraisal fees.

4️⃣ Bridge financing is temporary

Most lenders allow:

✔️ 30–90 days of bridge financing

✔️ some may extend up to 120 days depending on the province and lender policy

The loan is automatically repaid once funds from the sale arrive.

5️⃣ Required documents must be ready in advance

To secure bridge financing, lenders typically require:

✔️ firm purchase and sale agreements (with subjects removed)

✔️ MLS listings for purchase and sale properties

✔️ current mortgage statement

✔️ all documents supporting the new mortgage approval

Having everything prepared helps avoid delays in tight closing timelines.

💬 Final Thought

Bridge financing is a powerful tool when closings don’t align. It provides short-term access to equity, prevents deals from falling apart, and ensures the purchase proceeds without stress. With the right documents and timing, it’s a smooth, flexible option that keeps transactions on track.

If you want a breakdown of which lenders offer bridge financing and current cost ranges, message The Frontline Mortgage Group anytime.