Short answer: bridge financing is a short-term loan that lets you close on your new Ottawa home before the sale of your current one closes, using the confirmed (but not yet received) equity from your sale as security. It's typically repaid in full within days to a few weeks, the moment your old home's sale actually closes.
Why Buyers Need a Bridge Loan
Closing dates rarely line up perfectly. You might have a firm sale on your current home closing three weeks after you need to close on your new one, or you found the right house before yours even sold. Without bridge financing, you'd need the full proceeds from your old home in hand before you could complete the new purchase, forcing you to either time everything perfectly or walk away from a good opportunity.
How Bridge Financing Actually Works
- You need a firm, unconditional sale on your current home, a signed agreement of purchase and sale with no conditions remaining, before a lender will consider bridge financing.
- The loan amount is based on the net equity from your sale (sale price minus your existing mortgage balance and closing costs), not your new purchase price.
- It closes alongside your new purchase, giving you access to that equity early so you can complete the new closing without waiting for your sale to fund.
- It's repaid automatically when your sale closes and the proceeds come in, often just days or a few weeks later.
What Bridge Financing Costs
Bridge loans carry a higher interest rate than a standard mortgage, often prime plus 2-3%, but because they're usually outstanding for only a few days to a few weeks, the actual dollar cost is often modest. Most lenders also charge a flat administration fee (commonly $200-$500) on top of the interest. We calculate the real cost upfront so there are no surprises at closing.
Bridge Financing vs. a HELOC
If you already have a home equity line of credit in place before you list your home, that can sometimes cover the same gap more cheaply than arranging bridge financing after the fact. The trade-off is timing: a HELOC needs to be set up in advance, while bridge financing is arranged specifically around your confirmed sale and purchase closing dates.
What You Need to Qualify
- A firm, unconditional agreement of purchase and sale on your current home
- A confirmed closing date and purchase agreement on your new home
- Enough net equity in your current home to cover the bridge amount
Because it depends on a firm sale being in place, bridge financing is something we arrange as part of your overall purchase plan, not something you can set up at the last minute after an accepted offer with no sale yet.
Buying Before You Sell in Ottawa?
If you're weighing whether to list first or buy first, bridge financing is often what makes buying first realistic. Talk to Sean about your specific timeline before you make an offer.