{"id":75489,"date":"2024-10-22T09:43:24","date_gmt":"2024-10-22T16:43:24","guid":{"rendered":"https:\/\/www.nerdwallet.com\/ca\/?page_id=75489"},"modified":"2025-01-02T09:56:36","modified_gmt":"2025-01-02T17:56:36","slug":"what-is-bridge-loan","status":"publish","type":"page","link":"https:\/\/www.nerdwallet.com\/ca\/mortgages\/what-is-bridge-loan","title":{"rendered":"Understanding Bridge Loans in Canada"},"content":{"rendered":"\n

A bridge loan is short-term financing that fills the funding gap that may occur when you buy a new home before selling your current home<\/a>. With this type of financing, you can avoid losing out on a home you love because of a timing issue with the home you\u2019re selling. <\/p>\n\n\n\n

Bridge loans have higher fees and interest rates<\/a>, and there\u2019s always a risk that your current home doesn\u2019t sell as quickly as you anticipate. Bridge loans often work without a hitch, but if anything falls through you\u2019ll be responsible for paying multiple loans at once.<\/p>\n\n\n\n

Bridge loan basics<\/h2>\n\n\n\n

Say you own your home and plan to move. There are three possible ways to time it.<\/p>\n\n\n\n

    \n
  1. Sell your home before buying a new one. <\/strong>Any proceeds from selling your house go to your bank account. In many cases, those proceeds become the down payment for a new home. This makes buying a home easy: Lenders love seeing cash in the bank, ready to go. This timeline requires solving one detail: Where will you live if you sell your home before buying another? You could find a short-term rental, negotiate a rent-back agreement when selling, or live with your parents. But you\u2019ll want to have something lined up.<\/li>\n\n\n\n
  2. Sell your home and buy a new one at the same time. <\/strong>Sure, it\u2019s not impossible, but it can be tough to line up two major transactions simultaneously. While you\u2019re involved in both transactions, the counterparties are unrelated. The dates the offers are accepted may be too far apart to reasonably close on the same day, and the seller and buyer may have their own closing-date preferences that differ from yours.   <\/li>\n\n\n\n
  3. Sell your home after buying a new one. <\/strong>Even if you\u2019ve found a mortgage lender, you still need to come up with cash for a down payment<\/a> and closing costs<\/a>. Perhaps you have enough saved up elsewhere that you don\u2019t need to wait for your current home to sell. If so, feel free to close this tab. But if the equity in your current home is the key to buying a new home, a bridge loan is often the next best option. <\/li>\n<\/ol>\n\n\n\n

    \ud83d\udca1TL;DR <\/strong>A bridge loan is a short-term loan that can fund the down payment of a home purchase before you get the proceeds from selling your current home. When you do sell your house, you repay the bridge loan. <\/p>\n\n\n\n

    How do you qualify?<\/h3>\n\n\n\n

    Have enough equity. <\/strong>Most lenders require you to have at least 20% equity<\/a> in the home you\u2019re selling.<\/p>\n\n\n\n

    Have a buyer for your home. <\/strong>Some lenders require you to have a firm sale agreement in place for your home. If you need maximum flexibility, private lenders might be an option to consider, though it may cost more. <\/p>\n\n\n\n

    Have a good credit score. <\/strong>Borrowers with poor credit may have a hard time getting a bridge loan, even if they can secure a mortgage. <\/p>\n\n\n\n

    Have an idea of which lender you want to use. <\/strong>It can be convenient to get a bridge loan from the same lender that provides your mortgage, but not every lender offers them. <\/p>\n\n\n\n

    \ud83e\udd13 Nerdy Tip: <\/strong>If you think you might need a bridge loan, you\u2019ll want to let your mortgage broker or lender know early on in the process. This helps them ask for the right documentation and make the correct calculations. <\/p>\n\n\n\n

    How much can you borrow with a bridge loan?<\/h3>\n\n\n\n

    The amount of equity you have in your current home is the primary driver of how much you can borrow. <\/p>\n\n\n\n

    If your home is worth $400,000 and you still owe $300,000, you could get a bridge loan for up to $100,000. But you\u2019ll pay closing costs when you sell, so you can\u2019t count on using 100% of your equity for a new home. <\/p>\n\n\n\n

    For pricier homes, some lenders may cap the amount you can borrow with a bridge loan. <\/p>\n\n\n\n

    How long do you have to repay a bridge loan?<\/h3>\n\n\n\n

    A bridge loan can last up to 12 months, but in practice often only lasts a few days or weeks. <\/p>\n\n\n\n

    If you close on a new home in 25 days, but the sale of your current home won\u2019t close for 45 days, a bridge loan helps facilitate the purchase before the sale, for example.<\/p>\n\n\n\n

    Unlike a mortgage<\/a>, you typically don\u2019t repay a bridge loan in set increments. Instead, you pay the interest upfront as a closing cost on the new home, and you pay the balance when you sell your home. Lenders may secure the bridge loan against your current home and, in some cases, your new home. If your bridge loan term is on the longer end, a lender may require periodic payments.<\/p>\n\n\n\n

    If the sale of your home is delayed or falls through, you\u2019re left holding the bag. You\u2019ll be responsible for paying your new mortgage, the bridge loan and the mortgage on your old home, unless your home is paid off. <\/p>\n\n\n\n

    What\u2019s the interest rate on a bridge loan?<\/h3>\n\n\n\n

    Bridge loan rates are often based on a lender\u2019s prime rate<\/a> plus two to five percentage points. If the prime rate is 6.5%, for example, then you might receive a bridge loan offer with a rate between 8.5% and 11.5%.<\/p>\n\n\n\n

    Here\u2019s what that looks like in dollars: A $100,000 loan with a 10% interest rate that you pay back in 30 days will cost about $800 in interest. In addition to interest, you\u2019ll pay fees to the lender \u2014 plan for up to $500.<\/p>\n\n\n\n

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    \n\t\t\tAbout the Author\t\t<\/h4>\n\n\t\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t<\/a>\n\t\t\t\t\n\t\t\t\t
    \n\t\t\t\t\t\n\t\t\t\t\t\tKurt Woock<\/strong>\n\t\t\t\t\t<\/a>\n\n\t\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t\t\t\t\t

    Kurt Woock started writing for NerdWallet in 2021 and has covered mortgages, cryptocurrency, electric vehicles and small business software. Prior to joining NerdWallet, Kurt worked for the Colorado Public Employees'…<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Kurt Woock and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t

    \n\t\t\t\t\t

    \n\t\t\t\tDIVE EVEN DEEPER\t\t\t<\/h4>\n\t\t\n\t\t
    \n\t\t\t
    \n
    \n\t
    \n\t\t\t\n\t\t\"Porting\t<\/a>\n\t\t\t
    \n\t\t\t\n

    \n\t\n\t\tPorting or Transferring a Mortgage\t<\/a>\n<\/h4>\n\n\t
    \n\t\t

    Porting a mortgage applies an existing mortgage contract to a new home purchase. Porting can be less expensive than breaking a mortgage.<\/p>\n\t<\/div>\n\n\t

    \n\t\t\t\t
    \n\t\t\t\n\t\t\t
    \n\t\t\t\t\"\"Clay Jarvis<\/a>\"\"Barry Choi<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>
    \n
    \n\t
    \n\t\t\t\n\t\t\"Closing\t<\/a>\n\t\t\t
    \n\t\t\t\n

    \n\t\n\t\tClosing Costs When Buying a Home\t<\/a>\n<\/h4>\n\n\t
    \n\t\t

    Closing costs include legal and administrative fees and can run from 1.5%-4% of the purchase price of the home. <\/p>\n\t<\/div>\n\n\t

    \n\t\t\t\t
    \n\t\t\t\n\t\t\t
    \n\t\t\t\t\"\"Hannah Logan<\/a>\"\"Kurt Woock<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>
    \n
    \n\t
    \n\t\t\t\n\t\t\"Home\t<\/a>\n\t\t\t
    \n\t\t\t\n

    \n\t\n\t\tHome Equity Line of Credit vs. Mortgage: Differences, Pros and Cons\t<\/a>\n<\/h4>\n\n\t
    \n\t\t

    A home equity line of credit is a second mortgage that functions as a revolving line of credit, while mortgages are primary loans used to buy or refinance property.<\/p>\n\t<\/div>\n\n\t

    \n\t\t\t\t
    \n\t\t\t\n\t\t\t
    \n\t\t\t\t\"\"Sandra MacGregor<\/a>\"\"Kurt Woock<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>
    \n
    \n\t
    \n\t\t\t\n\t\t\"Current\t<\/a>\n\t\t\t
    \n\t\t\t\n

    \n\t\n\t\tCurrent Mortgage Rates in Canada\t<\/a>\n<\/h4>\n\n\t
    \n\t\t

    Compare current mortgage rates to find the lowest mortgage rate for your home buying needs.<\/p>\n\t<\/div>\n\n\t

    \n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\t\t<\/div>\n\t<\/section>\n\n","protected":false},"excerpt":{"rendered":"

    A bridge loan fills the financial gap that may appear when you want to buy a home before you close on the home you’re selling.<\/p>\n","protected":false},"author":88,"featured_media":75567,"parent":106,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"page-templates\/article-sidebar.php","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_is_hidden":false,"apple_news_is_paid":false,"apple_news_is_preview":false,"apple_news_is_sponsored":false,"apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":"[]","apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":"","_nw_pros_cons_block_schema":""},"content-classification":[16],"topic":[114],"cluster":[223],"pp_author":[880],"acf":[],"apple_news_notices":[],"yoast_head":"\nBridge Loan: When It's Needed, How To Get It - NerdWallet Canada<\/title>\n<meta name=\"description\" content=\"A bridge loan fills the financial gap that may appear when you want to buy a home before you close on the home you're selling.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.nerdwallet.com\/ca\/mortgages\/what-is-bridge-loan\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bridge Loan: When It's Needed, How To Get It - NerdWallet Canada\" \/>\n<meta property=\"og:description\" content=\"A bridge loan fills the financial gap that may appear when you want to buy a home before you close on the home you're selling.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.nerdwallet.com\/ca\/mortgages\/what-is-bridge-loan\" \/>\n<meta property=\"og:site_name\" content=\"NerdWallet Canada\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NerdWallet\" \/>\n<meta property=\"article:modified_time\" content=\"2025-01-02T17:56:36+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2024\/10\/GettyImages-2098016161-1024x683.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"683\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@NerdWallet\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n\t<meta name=\"twitter:label2\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data2\" content=\"Kurt Woock\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.nerdwallet.com\/ca\/mortgages\/what-is-bridge-loan\",\"url\":\"https:\/\/www.nerdwallet.com\/ca\/mortgages\/what-is-bridge-loan\",\"name\":\"Bridge Loan: When It's Needed, How To Get It - 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