Most Canadian bridge loans carry terms of 3 to 12 months. That window exists for one reason: you have committed to buying a property before your existing one has sold, and you need to cover the gap between closing dates.
Bridge financing is one of the least understood short-term lending products in Canada. Most people only discover it when a bank declines their application or their realtor mentions it in passing during a tight closing situation. By then, the timeline is already compressed.
This guide explains exactly how bridge financing works, what it costs, when a bank will and will not offer it, and what your options are if the bank says no.
What bridge financing is and how it works
Bridge financing is a short-term secured loan that covers the gap between two property transactions. You are buying a new property before your existing one has sold. The bridge loan funds the purchase, and the proceeds from your sale repay it.
Here is the basic structure.
The bridge period
The bridge loan is live from the closing date of your purchase until the closing date of your sale. If you buy on June 15 and your sale closes July 31, your bridge period is 46 days. The loan is secured against your existing property, your new property, or both, depending on the lender and the loan-to-value ratios involved.
How the loan is sized
The bridge loan amount is typically calculated as: the purchase price of the new property, minus your down payment available from liquid assets, minus any first mortgage you are taking on the new property. What remains is the gap the bridge fills.
Example: you are buying a $900,000 property. Your down payment is coming from your $700,000 existing home sale, but that has not closed yet. You have $80,000 in savings. Your new mortgage is $720,000. The gap between your available cash and the full purchase requirement is covered by the bridge.
Interest during the bridge period
Bridge loans are interest-only during the bridge period. You are not making principal payments. Interest accrues daily on the outstanding balance and is collected at maturity, meaning when your sale closes and the proceeds pay out. For short bridge periods, the carrying cost is usually modest relative to the transaction size.
The Office of the Superintendent of Financial Institutions classifies bridge loans as a form of mortgage credit. All federally regulated lenders must assess repayment capacity before advancing bridge funds, which is why a firm sale agreement is typically required by banks.
What bridge financing costs in Canada
The cost of a bridge loan depends on who is providing it. There are two categories: bank bridge loans and private bridge loans.
Bank bridge loans
Canadian banks offer bridge financing to existing mortgage clients who have a firm, unconditional sale agreement on their departing property. Rates are typically priced at prime plus 2% to 3%, with a one-time administration fee of $500 to $1,500. On a $200,000 bridge for 45 days at prime plus 2.5% (roughly 9.5% annualized), the interest cost is approximately $2,342. Plus the admin fee.
Bank bridge loans are the cheapest option available. The problem is access. Banks require a firm sale, existing client status, clean credit, and a bridge amount that fits within their overall mortgage exposure limits. A lot of borrowers do not check all four boxes.
Private bridge loans
Private lenders (including mortgage investment corporations and individual capital providers) offer bridge financing at higher rates but with significantly more flexible criteria. Rates typically run 8% to 14% annualized depending on the lender, loan-to-value ratio, property type, and borrower profile. Lender fees and broker fees add 1% to 3% of the loan amount on top.
On the same $200,000 bridge at 12% annualized for 45 days, interest is approximately $2,959. Add a 2% lender fee ($4,000) and a 1% broker fee ($2,000) and the total cost of the bridge is roughly $8,959. That is meaningful. But compared to losing a $900,000 purchase because you cannot fund the gap, it is a different conversation.
The real cost question
The honest way to evaluate bridge financing cost is not the interest rate. It is: what does this property transaction cost me if the bridge does not happen? Losing a deposit, missing a purchase opportunity, or selling under pressure to avoid a breach of contract are all more expensive than bridge financing fees in most situations.
When a bank will and will not offer bridge financing
Bank bridge financing is genuinely useful when it is available. The problem is the criteria are tight.
When a bank will approve a bridge loan
You already have your mortgage with that bank (or are taking the new mortgage there). You have a firm, unconditional agreement of purchase and sale on your existing property. The combined loan-to-value across both properties does not exceed 80%. Your credit and income are sufficient to qualify under OSFI stress test requirements. The bridge amount is within the bank's internal limits (typically $750,000 maximum at most major banks).
If all of those are true, a bank bridge loan is the right call. Fast, cheap, straightforward.
When a bank will decline a bridge loan
Your existing property is listed but not yet sold (no firm agreement in place). You are self-employed and your income documentation does not satisfy the stress test. Your credit score has deteriorated since your original mortgage was approved. The bridge amount exceeds the bank's internal limit. You are not an existing client and the new mortgage is going elsewhere. The property is not eligible under CMHC or the bank's eligible property criteria.
Any one of these typically results in a decline. Several together close the door completely.
What most borrowers do not realize
A bank decline on bridge financing is almost always criteria-based, not property-based. The property is usually fine. The issue is the borrower's profile or the absence of a firm sale. Private bridge lenders underwrite the property and the exit strategy, not the borrower's income or credit score alone. That is a fundamentally different model.
How to qualify for private bridge financing in Canada
Private bridge lenders are primarily concerned with two things: the loan-to-value ratio on the property being used as security, and the credibility of the exit strategy.
Loan-to-value
Most private bridge lenders in Canada will advance up to 75% to 85% of the appraised value of the security property. A property worth $800,000 with a $400,000 existing mortgage has $240,000 to $280,000 of accessible bridge capacity at 80% LTV. The cleaner the title and the more liquid the market, the higher the LTV a lender will consider.
Exit strategy
The exit strategy is how the bridge gets repaid. There are two acceptable exits: the sale of the existing property (firm or anticipated), or refinancing into a longer-term mortgage once the bridge period ends. Private lenders want to see that the exit is realistic and achievable within the bridge term. A property listed in a strong market with comparable sales support is a credible exit. A property that has been sitting unsold for six months in a declining market is a harder conversation.
What documents you need
For a private bridge loan, the typical documentation package is: a current appraisal or broker opinion of value on the security property; a copy of the existing mortgage statement; the agreement of purchase and sale on the new property; identification and confirmation of ownership; and if a firm sale exists, a copy of that agreement too.
Private bridge lenders can often issue a commitment letter within 24 hours of receiving a complete package and fund within 48 to 72 hours after that. In tight closing situations, that speed matters.
Solid Capital arranges private mortgage financing including bridge loans for Canadian property owners who cannot access bank bridge financing. If you have a closing coming up and the bank has said no, or if you do not yet have a firm sale in place, talk to a Solid Capital advisor. We review the full picture, not just the credit score. See how the process works before you apply.
Frequently Asked Questions
What is bridge financing in Canada?
Bridge financing is a short-term loan that covers the gap between purchasing a new property and receiving proceeds from the sale of an existing one. In Canada, bridge loans typically run 3 to 12 months and are secured against one or both properties.
How much does bridge financing cost in Canada?
Bank bridge loans are typically priced at prime plus 2% to 3%, plus an administration fee of $500 to $1,500. Private bridge lenders charge higher rates, typically 8% to 14% annualized, plus lender and broker fees of 2% to 4% of the loan amount. The total cost depends on the bridge amount and how long the bridge period runs.
What is the maximum loan-to-value for a bridge loan in Canada?
Banks typically limit bridge loans to 80% loan-to-value on the purchased property. Private lenders can go higher, sometimes up to 85% to 90% LTV, depending on the property type, location, and the borrower's exit strategy.
Can I get bridge financing if I do not have a firm sale on my existing property?
Banks almost always require a firm, unconditional sale agreement before approving bridge financing. Private bridge lenders are more flexible and will sometimes lend without a firm sale in place, provided the loan-to-value is strong and the exit strategy is credible.
How fast can I get bridge financing in Canada?
Bank bridge loans typically take 3 to 7 business days to arrange. Private bridge lenders can often close in 24 to 72 hours when the property and title are clear. Speed depends on how quickly you can provide the required documents.
