Aug 25

Bridge Financing: What to Know if You’re Buying and Selling a Home at the Same Time

Buying a home is one of the biggest financial decisions you’ll make, and if you’re selling one at the same time, things can get complicated quickly. What happens if your purchase closes before your sale? Do you have to walk away from your dream home just because the dates don’t line up?

That’s where bridge financing comes in. For many Ottawa homebuyers, a bridge loan offers the flexibility to move forward with confidence, even when buying and selling don’t happen at the same time.

This article explains what bridge financing is, how it works for Ottawa homeowners, what it costs, and whether it might be the right option for your next move.

What is Bridge Financing?

Bridge financing (sometimes called a bridge loan) is a short-term loan that helps homeowners cover the gap between purchasing a new property and selling their existing one.

Here’s a simple example: imagine you’ve found a new home in Kanata with a closing date in four weeks. The sale of your current home in Orleans won’t close for another six weeks. That two-week gap could leave you short on funds to cover the down payment or closing costs on your new property. A bridge loan provides temporary financing so you can move forward without unnecessary stress.

In Ottawa, where the housing market can move quickly—particularly in the spring and fall—bridge financing is a valuable tool for buyers who don’t want to miss out on the right property.

How Does Bridge Financing Work for Ottawa Homebuyers?

Bridge loans are designed to be temporary. They’re typically used for a few days to a few months, depending on how long it takes for your current home sale to close.

Here’s the step-by-step process for most Ottawa buyers:

1. You purchase a new home with a confirmed closing date.
2. Your current home hasn’t closed yet (or hasn’t sold yet).
3. Your mortgage broker arranges a bridge loan through a lender.
4. The loan covers your short-term needs (always the down payment and sometimes closing costs as well).
5. When your existing home sale closes, the bridge loan is repaid in full.

This approach allows you to move ahead with buying your new home without waiting for funds from your old one.

What Do Lenders Require for Bridge Financing?

The requirements for bridge loans are pretty standard across Ontario. Most lenders will want to see:

• A firm sale agreement for your current home (signed agreement of purchase and sale).
• Enough equity in your current property to cover the loan.
• Good credit and stable finances, just as they would for a traditional mortgage.

Some lenders may consider bridge financing without a firm sale, but this is much less common in Ottawa and usually comes with stricter conditions and higher costs. In these cases, you’re generally required to take out a mortgage that covers 100% of the purchase price and closing costs, which also blankets your existing home.

This type of financing often comes with higher rates and additional fees. For example, you might see fees of around 3.5% of the loan amount along with an interest rate of 7.99% or more.

How Much Does Bridge Financing Cost in Ottawa?

Because bridge loans are short-term, they often come at a higher cost than a traditional mortgage. However, since you’ll only hold the loan for weeks or months, the overall expense is usually manageable.

Here’s what Ottawa homebuyers can typically expect:

• Interest rates: Most lenders charge Prime + 2% to Prime +5%
• Administrative fees: Often a few hundred dollars, depending on the lender.
• Daily interest charges: Since the loan is temporary, interest is often calculated daily.

For example, if you need a bridge loan of $50,000 for 30 days at Prime + 2.5% (using 4.95% Prime), your interest cost would be about $306.17. This does not include the administration fee.

A simpler way to think about it: for every $10,000 borrowed, the cost works out to about $2.04 per day.

For many buyers, this is a small price to pay for the peace of mind of not losing out on their new home.

What Are the Benefits of Bridge Financing?

For Ottawa homeowners navigating a busy housing market, bridge financing offers several advantages:

• Peace of mind: You can make a firm offer without worrying about whether your sale closes on time.
• Flexibility: Move into your new home before your old one closes, or take extra time to stage or renovate your current property.
• Reduced stress: Eliminate the pressure of trying to line up two closing dates perfectly.

What Are the Risks of Bridge Financing?

Bridge financing isn’t without its drawbacks. Some things to keep in mind include:

• Higher interest rates than traditional mortgages.
• Limited availability — not all lenders offer bridge loans (but most do).
• Financial risk if your current home sale is delayed or falls through, leaving you responsible for the loan longer than expected.

These risks are why it’s so important to work with an experienced mortgage broker in Ottawa. With the Chris Allard team in your corner, we can help you weigh the pros and cons, explore alternatives, and ensure you’re not taking on more risk than necessary.

What Are the Alternatives to Bridge Financing in Ottawa?

Bridge loans aren’t the only solution for mismatched closing dates. There are alternatives, such as:

• Negotiating a longer closing date on your new home.
• Using a Home Equity Line of Credit (HELOC) to cover short-term costs.
• Leveraging a personal line of credit or savings, if available.

Each option has its own pros and cons, but in many cases, bridge financing is the simplest and most straightforward solution.

Which Ottawa Lenders Offer Bridge Financing?

Most Canadian banks, credit unions, and mortgage companies offer bridge loans if they are the company doing the mortgage as well. 

When working with the Chris Allard Mortgage Team, we compare options across lenders to help you secure the most competitive terms. Since bridge loans are short-term and lender policies differ, having us negotiate on your behalf can save time, stress, and money.

Should You Consider Bridge Financing in Ottawa?

If you’re planning to buy and sell a home in Ottawa at the same time, bridge financing may be worth exploring. It’s not the cheapest form of borrowing, but it can provide the peace of mind and flexibility you need during a hectic move.

The key is preparation. Talking to a local mortgage broker early in the buying process ensures you know your options, costs, and eligibility. That way, if closing dates don’t line up, you’ll already have a plan in place.

Final Thoughts

Bridge financing isn’t for everyone, but for many Ottawa homebuyers, it’s the difference between seizing the right opportunity and missing out. While the costs are higher than a standard mortgage, the short-term nature of the loan makes it an effective solution when timing is tight.

When you choose to work with the Chris Allard Mortgage Team, you’ll get expert advice, access to multiple lenders, and the confidence to move forward knowing your financing is in place. If you’re buying and selling a home in Ottawa and want to explore whether bridge financing is right for you, reach out to us today.

Chris Allard

Chris Allard’s experience in the field means he can get you offers with over 50 financial institutions lending in Ottawa. Every lender has many mortgage products they offer, which means Chris and his team will make sure a mortgage caters to your needs while also ensuring you get a competitive rate. Chris Allard is a proud mortgage broker of Smart Debt Mortgages, independently owned and operated. Smart Debt broker #12236.