What bridge financing is
Bridge financing is short-term financing used to cover a temporary gap between two transactions or financing events.
The most common residential example occurs when:
The buyer has purchased a new home
The current home has been sold
The new purchase closes before the old sale
Equity from the sale is therefore temporarily unavailable
The bridge loan advances part of the expected net sale equity and is repaid when the sale closes.
TD’s current public bridge-financing description is one named-lender example: it treats the loan as short-term financing between the purchase and sale closings and requires sale and purchase agreements together with approval for the new TD mortgage or secured plan. Its standard public product describes terms generally up to 90 days, although lender policies and exceptions vary.
Classification: Named-lender policy and common lender practice.
Named source: TD Canada Trust.
Current status: Accessed July 23, 2026.
Material qualification: There is no universal 90-day Canadian bridge-loan rule.
Purchase before sale versus sale before purchase
Subsection — Purchase closes before sale
Bridge financing may cover the down payment or closing shortfall until the sale proceeds arrive.
Subsection — Sale closes before purchase
Traditional bridge financing may not be required because the sale proceeds are available first.
The borrower may instead need:
Temporary accommodation
Storage
Deposit planning
Short-term investment of sale proceeds
Protection against a delayed purchase
A bridge loan solves a funding timing problem—not an occupancy problem.
Firm sale requirement
Many institutional bridge products require a firm sale agreement, meaning the sale conditions have been waived or fulfilled.
The firm sale provides:
Identified buyer
Sale price
Closing date
Expected repayment source
Direction of sale proceeds
As a current named-lender example, TD’s broker policy requires firm purchase and sale agreements with applicable waivers, income confirmation, a current mortgage statement and prior approval of the new TD mortgage. It also directs sale proceeds through the lawyer to repay the bridge.
Classification: Named-lender policy.
Source: TD Broker Services Information Kit, updated July 6, 2026.
Material qualification: Other banks, credit unions and private lenders may use different term, security and sale-status requirements.
How the bridge amount is determined
The lender usually begins with estimated net sale equity.
Formula
Estimated net sale equity = Sale price − Existing mortgage payout − Secured debts − Selling and closing costs
The bridge is then limited by:
Required down payment
Expected net equity
Lender maximum
Security
Borrower qualification
Sale and purchase dates
Worked bridge example
Assumptions
Current home sale price: $900,000
Existing mortgage payout: $500,000
Estimated realtor, legal and closing costs: $45,000
Additional funds required for the new purchase: $250,000
Bridge term: 45 days
Illustrative annual bridge rate: 8.20%
Bridge fee: $500
No sale delay
Figures are illustrative
Variables
SP = Sale price
MP = Mortgage payout
SC = Selling costs
NSE = Net sale equity
BL = Bridge loan
R = Annual interest rate
D = Number of days
BI = Bridge interest
Net sale equity
NSE = Sale price − Mortgage payout − Selling costs
NSE = $900,000 − $500,000 − $45,000
NSE = $355,000
The borrower needs only $250,000, so the illustrative bridge is:
BL = $250,000
Interest
Bridge interest = Bridge loan × Annual rate × Days ÷ 365
BI = $250,000 × 8.20% × 45 ÷ 365
BI = approximately $2,527.40
Total illustrative bridge cost
Total cost = Interest + Fee
Total cost = $2,527.40 + $500
Total cost = $3,027.40
Result
The expected sale equity supports the $250,000 bridge, with an illustrative 45-day cost of approximately $3,027.
Interpretation
The bridge remains workable only if:
The sale closes as agreed
The payout and costs remain accurate
No new lien or claim reduces sale proceeds
The lawyer directs sufficient funds to the bridge lender
Bridge financing compared with other structures
| Product | Best suited to | Repayment source | Main distinction |
|---|---|---|---|
| Institutional bridge loan | Firm sale closing after new purchase | Existing home sale proceeds | Short, defined timing gap |
| Private bridge mortgage | No ordinary bridge program fits, sale is not firm, or another temporary event is expected | Sale, refinance, construction completion or other documented event | Broader use but higher cost and greater exit risk |
| HELOC | Funds needed before a sale where borrower qualifies and line already exists | Borrower repayment or sale | Revolving and not tied to one closing |
| Refinance | Longer-term equity need | Amortizing mortgage payments | Permanent restructuring, not merely timing |
| Second mortgage | Existing first mortgage should remain | Refinance, income or sale | Separate registered debt rather than sale-linked bridge |
| Open mortgage | Short expected holding period without a firm sale | Future sale or refinance | Full mortgage product with flexible repayment |
| Builder-closing bridge | Firm purchase must close before suitable long-term mortgage is ready | B-lender or A-lender refinance | Solves financing-readiness gap rather than sale-date gap |
Institutional bridge versus private bridge
An institutional bridge usually has a clearly identified firm sale and a short period between two closing dates.
A private bridge may be used where:
Current property is not yet sold
Firm sale does not meet the bank’s criteria
Required term exceeds institutional policy
Borrower does not qualify for the bank’s new mortgage
Builder purchase must close immediately
Commercial due diligence cannot be completed in time
Foreign income or credit prevents ordinary approval
Construction must be completed before refinancing
The word “bridge” describes intended use. It does not reduce the risk of a private mortgage.
What the underwriter is thinking
The bridge underwriter is asking:
What exact gap is being bridged?
What is the repayment event?
Is the sale firm?
Are sale and purchase parties consistent?
What is the expected net sale equity?
What liens must be paid?
What if the sale is delayed?
What if the buyer defaults?
Can the borrower carry both homes?
Is the new mortgage fully approved?
Does the bridge term provide enough time?
Is a bridge loan more suitable than a refinance or HELOC?
Risks
Subsection — Sale delay
Interest continues until repayment. A delayed sale may also produce:
Extension fee
Higher rate
Additional legal cost
Overlapping property expenses
Need for lender consent
Subsection — Sale failure
Where the buyer fails to close, the borrower may be left with:
Two properties
Two mortgage structures
Bridge balance
Litigation
Need to relist
Lower eventual price
Subsection — Insufficient net proceeds
The sale price is not the same as available equity.
Deductions can include:
First mortgage
HELOC
Second mortgage
Penalty
Realtor commission
HST on commission
Legal fees
Property-tax adjustment
Judgment or lien
Bridge interest and fees
Subsection — Delayed new-mortgage funding
A bridge is often dependent on the new mortgage funding. In TD’s named policy, for example, the bridge is not advanced until the TD mortgage or Home Equity FlexLine advances.
Subsection — Term mismatch
A loan designed for 30 or 60 days may become unsuitable if the repayment event realistically requires six months.
Bridge decision tree
Borrower needs funds temporarily
↓
Is the current home firmly sold and closing after the new purchase?
Yes → Review institutional bridge loan.
No → Continue.
↓
Does the borrower already have an available HELOC or refinance capacity?
Yes → Compare cost, penalty and flexibility.
No → Continue.
↓
Is the repayment event a sale, refinance, construction completion or documented payment?
No → The need may not be bridge financing.
Yes → Continue.
↓
Can an alternative lender complete the transaction within the deadline?
Yes → Compare the alternative mortgage with a private bridge.
No → Continue.
↓
Does private financing have sufficient equity, payment capacity and a tested exit?
No → Consider extension, renegotiation, sale or another solution.
Yes → Structure the shortest suitable bridge with a contingency plan.
HopeWell case studies
London builder purchase: six-month alternative bridge to B lending
London clients approached with approximately five days remaining before a builder closing.
The husband was a truck driver with low traditionally verifiable income, and the wife was not working. A-lender financing was unavailable, while the builder demanded a substantial fee for an extension.
A six-month alternative-lender mortgage closed the purchase. The mortgage was not treated as the final structure.
The exit was prepared through a B-lender stated-income program supported by twelve months of bank statements.
The underwriting lesson: A rush bridge should buy time for an already identified documentation-based exit, not merely move the closing crisis six months forward.
Whitby builder closing with foreign income and Canadian credit problems
Whitby buyers approached approximately four days before closing.
The borrower had strong, verifiable UAE income, but:
Canadian credit history was limited
Collections were present
Approximately 80% LTV was required
A and B lenders did not accept the combined risk within the timeline
A private first mortgage completed the purchase as a one-year bridge.
The exit plan required:
Paying collections
Strengthening Canadian credit
Maintaining mortgage payments
Reassessing institutional refinancing
The underwriting lesson: Strong foreign income does not eliminate Canadian credit and LTV risk. A private closing bridge is suitable only where the borrower immediately works on the issues preventing institutional approval.
Brampton commercial closing with eight business days remaining
A Brampton business owner had eight business days remaining to close a commercial unit purchase.
The file still required:
Commercial appraisal
Phase I Environmental Site Assessment
Property-use review
Lender underwriting
A private commercial mortgage closed the purchase after the appraisal and environmental report were expedited. The longer-term plan was institutional commercial refinancing after the emergency timeline had passed.
The underwriting lesson: In an urgent commercial bridge, identifying and completing the critical due-diligence reports can be more important than broad rate shopping.
Pattern we see
Many transactions described as “bridge financing” are not ordinary sale-to-purchase bridges.
They may actually be:
Builder-closing rescue
Private purchase mortgage
Construction completion loan
Short-term commercial mortgage
Equity takeout pending an asset sale
Temporary second mortgage
Using the correct label matters because each structure has different qualification, security, cost and exit risk.
Common reasons files fail
Existing home sale is not firm
Sale agreement contains unresolved conditions
Net sale equity is overstated
Existing HELOC or lien is omitted
New mortgage is not fully approved
Bridge application begins too late
Purchase and sale parties do not match lender policy
Sale closing is delayed beyond the bridge term
Borrower cannot carry overlapping property expenses
Property sale fails
Builder extension cost was not compared with bridge cost
Private bridge has no institutional exit
Borrower assumes the lender will automatically extend the loan
Lawyer does not receive instructions in time
Important warning
A firm sale substantially improves repayment certainty, but it does not eliminate bridge risk.
A buyer may fail to close, litigation may follow and the property may need to be sold again. The borrower should understand the contingency plan before relying on sale proceeds that have not yet been received.
If You Remember Only Three Things
Traditional bridge financing solves a short timing gap between a firm sale and an earlier purchase closing.
A builder-closing or private bridge is a different and generally higher-risk transaction.
Every bridge should identify the repayment event, net proceeds, delay contingency and maximum realistic term before funding.