Bridge Financing

What is bridge financing?

Bridge financing, also called a bridge loan, is a way to help bridge the gap between closing on your current house and your new place because it allows you to carry the mortgage on two properties for a specified amount of time, typically a maximum of 90 days.

So how does bridge financing work? These short-term loans use your current home’s equity to cover some of the costs of your new home, like the down payment. That way, you don't have to miss out on your dream home while waiting on your current house to close.

Pros of bridge financing

  • Financial Flexibility. You may be able to use the home equity in your current home to help purchase your dream home before someone else swoops in.
  • Time. You don’t have to stress about the sale closing on your current home before you close on your new home.

Cons of bridge financing

  • Interest. Although they are short-term, bridge loans have interest rates similar to open rate mortgages, which are often higher than the interest rate you may be used to paying with your current mortgage.
  • Cost. If for some reason your sales agreement falls through on your current house, you may have to pay two mortgages until a new sale is finalized.
To qualify for bridge financing, you'll need:
  • A copy of the Sale Agreement for the home you're selling and the Purchase Agreement for the home you're buying.
  • You must be approved for a TD Canada Trust Mortgage or TD Home Equity FlexLine on the new property to qualify for a bridge loan.

Is bridge financing right for you?

Like your home buying situation, your home financing needs are unique. Here are some tips to help you decide:
  • You’ve found the perfect place and want to act. Say you’ve found a new place before your current home sale closes. You don’t have to let your dream home slip away. With bridge financing, you can be empowered to make an offer when you’re ready.
  • You can’t afford a down payment without the money from your current home. When you’re selling a home, timing doesn’t always work out perfectly. If you need some extra cash to make a down payment on your new home, bridge financing can help cover the difference until the sale closes on your current place.
  • You want time between closing dates. Maybe you want to move into your new home before your current home closes, for instance, to do some renovations. In that case, bridge financing may be an option to consider.

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