Bridge loans are short term mortgages that let you access the equity in a property you already own so you can close on a purchase before your sale completes. The loan is registered on title, it runs for a defined window, and it is repaid in a lump sum when your sale closes or when longer term financing takes over.
In Ontario, bridge loans come from two very different places. Banks offer a narrow version with strict conditions attached. Private lenders offer a much broader version that reaches situations the bank product cannot. If your sale is still conditional, your income is hard to document, or your credit has taken a hit, the private route is often the only one available.
This article explains how bridge loans work, what private lenders actually look at, what the financing costs, and where the real risks sit.
What bridge loans actually are
A bridge loan is a mortgage secured against real estate for a short term, usually somewhere between one month and twelve months. It is registered on title in the same way any other mortgage is, and it is repaid at a defined event rather than being paid down slowly over decades.
Two features separate bridge loans from conventional mortgage financing.
They are temporary by design. Nobody holds a bridge loan for twenty-five years. It exists to cover a specific window, and both you and the lender agree in advance on how and when it ends.
They are underwritten on the property and the exit. A bridge lender is looking at the equity in the real estate and at the event that will repay the loan. Income documents and credit still get reviewed, but they carry far less weight than they would at a bank.
Important to note: that second feature is the whole reason private lenders dominate this corner of the market.
The firm sale requirement, and why private lenders see it differently
Common myth: you cannot get a bridge loan unless your current home is already sold firm.
That statement appears in most articles on this topic, and it is only half true. It describes bank bridge loans accurately. It does not describe the private market at all.
What banks require
A bank will usually bridge you only when three things line up. Your existing property is sold firm with every condition waived. The same bank is funding the mortgage on the property you are buying. And your income and credit meet their standard qualification guidelines, including the stress test.
Remove any one of those and the bank bridge generally disappears. A conditional sale, a purchase financed elsewhere, self employed income, or a past credit issue is enough to end the conversation.
What private lenders do instead
Private lenders are individuals, mortgage investment corporations, and small lending firms that fund mortgages with their own capital. They write their own guidelines, which is why they can approve files a bank declines. If you want the broader background on how this category works, our overview of private mortgages covers the fundamentals.
For bridge loans specifically, that flexibility shows up in concrete ways. A private lender can bridge against a property that is listed but not yet sold. They can work with self employed income that has not been reported in a traditional way. They can accept bruised credit when the equity position is strong. And because the decision does not travel through multiple layers of approval, they can move on a compressed timeline.
A firm sale agreement still helps. It is the strongest exit a file can have, and it usually improves the terms you are offered. It is simply not a hard requirement the way it is at a bank.
How bridge loans work in practice
Here is an illustrative example. The figures are hypothetical and used only to show the structure, not to represent any actual approval.
A homeowner has a property worth roughly $800,000 with a $450,000 first mortgage registered against it. They have bought a new home closing on March 1. Their current home is scheduled to close on March 25. They need $120,000 for the down payment on the purchase, and every dollar of it is sitting inside the property they are about to sell.
A bridge lender registers a mortgage against the existing home for the amount needed plus costs. Those funds go to the borrower’s lawyer and complete the purchase on March 1. On March 25 the sale closes, the proceeds pay out both the first mortgage and the bridge loan, and whatever remains goes to the homeowner.
The bridge existed for twenty four days. That is the entire product.
Security does not always sit on the existing property. Depending on the lender and the structure, bridge loans can be registered against the new property, or against both properties at once. Where the charge sits matters, because a lender in second position carries more risk than one in first position, and the terms reflect that.
When bridge loans make sense
Buying before selling. The most common use by a wide margin. Your purchase closes before your sale does and you need the down payment in hand.
A sale that collapsed. Your buyer’s financing fell apart days before closing, and you are still contractually committed to the purchase you already firmed up.
A closing date that moved. Delays are routine with new builds, estate sales, and chains of linked transactions. Short term financing absorbs the mismatch.
Renovating before listing. Some sellers fund repairs or updates that will meaningfully lift the sale price, then repay from the proceeds.
Buying time while a permanent solution is arranged. If payments have fallen behind and a sale or refinance is coming, short term financing can hold things together in the meantime.
A payment tied to a closing. Sometimes the need is not the purchase itself but an obligation that has to clear before a deal can complete. In those cases the structure often looks less like a bridge and more like a second mortgage, and it is worth asking which one actually fits.
Bank bridge loans compared with private bridge loans
| Bank bridge loan | Private bridge loan | |
|---|---|---|
| Firm sale agreement | Required | Preferred, not required |
| Income documentation | Full verification and stress test | Flexible, including self employed |
| Credit requirements | Standard bank guidelines | Reviewed, rarely decisive |
| Typical processing speed | Slower, multiple approval layers | Faster, direct lender decision |
| Property types | Owner occupied, standard | Owner occupied, rental, rural, unique |
| Relative cost | Lower | Higher |
| Flexibility on term and extension | Limited | Negotiable, varies by lender |
Key takeaway: if you qualify for a bank bridge loan, take it. It is the cheaper product. Private bridge loans exist because a large share of real situations do not meet bank conditions, and in those cases the comparison is not between a bank bridge and a private bridge. It is between a private bridge and losing the deal.
What bridge loans cost
Costs come from several places, and every one of them should be itemized in writing before you sign anything.
Interest. Charged for the days the loan is outstanding. Some lenders apply a minimum interest period regardless of how quickly you repay, so ask about that specifically on very short bridges.
Lender fee. Charged by the lender, usually expressed as a percentage of the loan amount.
Brokerage fee. Charged for arranging the financing and disclosed to you in writing before you commit.
Legal fees. Your lawyer, and in most private deals the lender’s lawyer as well. You typically cover both.
Appraisal. Most private lenders require a current appraisal from an approved appraiser, since the property value is the foundation of the decision.
Discharge and administration costs. Charged when the loan is repaid and removed from title.
Common mistake: asking how much you can borrow instead of how much will actually reach your lawyer. Fees and prepaid interest are frequently deducted from the advance rather than paid out of pocket, which is convenient but means you need to borrow slightly more than the sum you require. Work backwards from the net funds you need to close.
Federal rules require lenders to disclose the full cost of borrowing before you sign, including administrative charges, broker fees, and appraisal costs. The Financial Consumer Agency of Canada sets out your rights when applying for a mortgage in plain language, and Ontario’s regulator has published its own disclosure expectations for private mortgage transactions. If a number is missing from your paperwork, ask why before you sign.
What private lenders assess on a bridge loan file
Equity. The single most important factor. Lenders compare the total of all mortgages registered against the property to its appraised value. A stronger equity position creates more room to work with.
The property itself. Location, condition, and marketability. A house in a town with active comparable sales is easier to finance than a rural property on acreage with thin sales data.
The exit. A firm sale agreement is the strongest exit available. An active listing with recent showings is next. A vague intention to sell eventually is the weakest, and it is the most common reason a bridge file gets declined.
Position on title. First mortgages carry less risk than seconds, and the terms follow accordingly.
Credit and income are reviewed but rarely decide the outcome. That is why bridge loans stay accessible to borrowers who have been turned down elsewhere, including those working through a bad credit mortgage situation and business owners exploring self employed mortgage options after a bank declined them on documentation alone.
The bridge loan process, step by step
- Review the situation. Property value, existing mortgages, the amount required, and the dates involved.
- Confirm the exit. How the loan gets repaid, when, and what happens if that timeline slips.
- Submit to matched lenders. A broker sends the file to lenders whose guidelines genuinely fit the deal rather than sending it everywhere and hoping.
- Receive and read the commitment. It sets out the amount, term, cost, and conditions. Read it fully before signing, including the extension and prepayment terms.
- Satisfy conditions. Usually an appraisal, proof of insurance, and any documents specific to the file.
- Instruct lawyers. Your lawyer and the lender’s lawyer handle registration and the flow of funds.
- Fund and repay. Money advances on the closing date. When the sale or refinance completes, the bridge is paid out and discharged from title.
On straightforward files with strong equity, approvals in as little as 24 hours are possible. That refers to a conditional approval rather than funding. Actual funding depends on the appraisal, the lawyers, and how quickly conditions are met.
Risks worth understanding before you sign
Your property might not sell on schedule. This is the main risk in every bridge file. Ask what happens if it does not, and get the answer in writing. Some lenders will extend for a fee. Others will not.
Carrying two properties is expensive. During the bridge period you are paying the existing mortgage, the bridge loan, and the new mortgage. Make sure you can carry all of it for longer than you expect to need to.
Costs are front loaded. Fees are charged against the loan amount, not prorated by how long you hold it. A very short bridge can carry a high effective cost even when the interest itself is modest.
Terms vary widely between lenders. Prepayment provisions, extension terms, and default clauses differ significantly. Two commitments with similar headline numbers can be very different documents.
Key takeaway: the exit is not a formality. Ontario’s regulator has noted that the suitability of a private mortgage depends heavily on whether a feasible exit strategy exists, a point it raised directly in its consumer protection findings on private mortgages. Build in more runway than you think you need, and have the exit pressure tested by someone who is not relying on optimism.
Frequently asked questions about bridge loans
Q: How long do bridge loans last?
A: Most run from one month to twelve months. The term is set to match the expected repayment date with some cushion built in.
If your sale date is firm, the term can be very short. If you are bridging against a property that is listed but not yet sold, expect the lender to set a longer term to allow for market realities.
Q: Do I need a firm sale agreement to get a bridge loan?
A: Not with a private lender. Banks generally require an unconditional sale agreement before they will bridge. Private lenders underwrite equity and exit, so a property that is listed and actively showing can support a bridge.
A firm sale still improves your position. It is the strongest exit a lender can see, and it usually produces better terms.
Q: Can I get a bridge loan with bad credit?
A: Often yes. Private lenders weigh equity and the repayment plan far more heavily than credit score.
Credit is still reviewed, and a recent pattern of missed payments will factor into the terms. It is rarely the single reason a bridge file is declined when the equity and the exit are solid.
Q: How much can I borrow with a bridge loan?
A: It depends on your equity, the property, and how many mortgages are already registered against title. A lender compares total borrowing against the appraised value and works within their own guidelines from there.
Remember to work backwards from the net funds you need at closing, since fees are commonly deducted from the advance.
Q: What happens if my property does not sell in time?
A: Options generally include extending the loan for a fee, refinancing into new financing, or adjusting the listing price to move the property.
Raise this scenario with your broker before you sign, not after. The earlier you flag a slipping timeline, the more options remain open.
Q: Are bridge loans the same as second mortgages?
A: They overlap. Bridge loans are frequently registered as second mortgages, but what defines them is the short term and the specific repayment event.
A second mortgage can be ongoing financing with regular payments and no defined end date. A bridge loan is built to disappear.
Talking through your timeline
Bridge loans reward preparation. The files that close cleanly are the ones where the exit was confirmed early, the costs were understood before signing, and the timeline had room built into it.
Our agents operate under a licensed brokerage and place bridge loans with private lenders across Ontario. If you are trying to close on a purchase before your sale completes, or you need short term financing to hold a deal together, start with a conversation. The consultation is free and comes with no obligation.
Apply today or call 1-855-242-7732 to talk through your situation.
