Bridge Financing Between a Sale and Purchase
Base the bridge loan on the expected net proceeds of the sale and on firm dates for both transactions.
In this article
Owning two houses for eight weeks, or none: this scenario threatens any household whose sale and purchase do not sign on the same day. Bridge financing covers that gap, under precise rules. The amount rests on the sale's expected net proceeds, which is the confirmed price minus the balance and costs. That is your future down payment, which the lender advances. The non-negotiable condition: two firm transactions, with promises signed and conditions lifted on both sides. A bridge is never built on a conditional sale. The cost includes a higher rate, file fees and interest over the actual duration. Expect a few thousand dollars for a few weeks, the price of a single move and of renovations done before moving in. The maximum duration, often 90 days, sets the limit for delays. This article details the eligibility conditions, the full cost calculation and the coordination between notaries that lets the bridge close itself.
Calculate the sale's expected net proceeds
Bridge financing advances the money your sale has not yet paid out. Its amount is calculated on the expected net proceeds: the confirmed sale price, minus the mortgage balance to repay, the brokerage commission, legal fees and tax adjustments. That net, often ten to fifteen percent below the listed price, becomes the down payment available for the new purchase, and so the bridge's ceiling. Do the calculation with the real figures of the accepted sale promise, not an optimistic estimate. A bridge based on overstated proceeds leaves a hole to fill at closing, when nothing can move any more. Take the lowest figure.
Require two firm transactions
The bridge's non-negotiable condition comes down to one word: firm. The sale and the purchase must both have signed promises with conditions waived, because the lender repays the bridge from the sale's proceeds. A sale still conditional on the buyer's financing or an inspection guarantees nothing, and no serious lender will advance on that basis. This requirement shapes the offer calendar: the purchase goes firm after the sale, or both are coordinated with cross-conditions. The closing dates are then fixed with both notaries, and the bridge repays itself automatically the day the sale closes.
Price a few weeks realistically
A bridge costs more than an ordinary mortgage, and you accept that surcharge knowingly. The typical structure has a rate two to three points above the mortgage rate, opening fees of a few hundred dollars, sometimes additional legal fees, and interest over the actual length of the overlap. On a hundred and eighty thousand dollars for eight weeks, the total bill is around two to three thousand dollars. Compare that amount with what it buys: a single move instead of two, no storage, the chance to paint and renovate before moving in, and above all no temporary housing between the two properties.
Plan for the sale being delayed
You also need to cover the case of a sale that does not close on the expected date: a buyer struggling with financing, a delayed notary, a last-minute complication. The bridge contract sets a maximum duration, often ninety days. Beyond it, the file is renegotiated on less favourable terms. So plan the margin from the start. A bridge calibrated tightly to the expected dates absorbs no surprises. A duration requested with a few weeks of cushion costs only a little more in interest and avoids an emergency renegotiation. Keep the documents of both transactions together until full repayment, and request the bridge's closure confirmation in writing.
Quebec scenario
A family in L'Ancienne-Lorette lives the scenario they feared: the perfect house accepts their offer on May 15, but the sale of their own house only signs on July 10. Eight weeks of owning two houses, or none. Bridge financing exists for that gap, and the family examines it point by point before committing. First the amount: the lender advances the expected net proceeds of the sale, which is the confirmed price minus the mortgage balance and costs, about $180,000. That is the down payment on the new purchase. Then the non-negotiable condition: two firm transactions, with promises signed and conditions lifted on both sides. A bridge is never built on a conditional sale. Finally the cost: a rate two points above their mortgage rate, a $500 file fee and interest over eight weeks, about $2,300 in all. That is the price of a single move and of renovations done before moving in. The advisor asks about the blind spot: what if the sale is delayed? The bridge's maximum duration, 90 days, leaves a margin. Beyond it, the file is renegotiated. The family signs, the two notaries coordinate the dates, and the bridge repays itself on July 10, when the sale closes. For the family, that $2,300 is the exact cost of not living out of boxes.
Checklist
- Confirm both transactions are firm
- Calculate the sale's expected net proceeds
- Verify the bridge's rate, fees and maximum duration
- Price the interest over the actual duration
- Plan the margin if the sale is delayed
- Coordinate the dates with both notaries
- Plan the automatic repayment at closing
- Compare with the cost of a double move
- Keep both transactions' documents together
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