Bridge Financing in Toronto: Buy Your Next Home Before Selling the Current One
Bridge financing (also called a bridge loan or swing loan) lets you purchase your next home before selling your current one. It is very common in the GTA's competitive market where good homes sell quickly.
How Bridge Financing Works
You get a short-term loan (usually 6-12 months) secured by the equity in your current home. The funds are used for the down payment and closing costs on the new property. Once you sell your old home, the bridge loan is repaid.
Typical Costs and Rates
- Interest rates are higher than regular mortgages (often prime + 1-3% or more).
- Interest-only payments are common.
- Setup fees, legal costs, and sometimes discharge fees on the old mortgage.
- Some lenders allow "open" terms with no prepayment penalty when you sell.
Risks and Timing Considerations
- If your current home takes longer to sell than expected, costs add up quickly.
- Carrying two properties (even briefly) increases financial pressure.
- Market conditions matter — in slow markets, bridge loans become riskier and more expensive.
Alternatives to Traditional Bridge Loans
Some buyers use a HELOC on the current home, a vendor take-back mortgage, or negotiate longer closing dates. In some cases, a "sale of home" condition can be structured creatively with the right lawyer and broker.
Tools and experience can help model potential carrying costs and explore bridge financing options for your situation. Actual terms, costs, and availability depend on lenders and your full circumstances.