Can I buy a new home before I sell my current one?

Yes, and in Canada the usual tool is bridge financing, a short-term loan from your mortgage lender. A bridge loan lets you use the equity in your current home before its sale closes. Lenders generally offer bridge financing only when your sale is firm, meaning the buyer's conditions have been removed, and the loan is subject to lender approval.

How bridge financing works

Say your new home closes on the 1st of the month, but the buyer of your current home does not close until the 30th. You need your equity from the sale to pay the down payment on the new home. You will not have that equity for a month.

A bridge loan covers that gap. The lender advances the down payment, secured by the equity in the home you are selling. The sale proceeds repay the bridge loan when that sale closes. You pay interest for the days the loan is outstanding, and there may be a fee.

Many banks, credit unions and monoline lenders offer bridge financing if you take your new mortgage with them. Each lender sets its own limits on the amount and on how long the bridge can last. Before you set your closing dates, we check each lender's bridge limits for you.

Why a firm sale matters

A lender needs to know the money is coming. When your sale is firm, with a signed agreement and conditions removed, the lender can see the proceeds and the closing date. If your current home has not sold, or the sale is still conditional, most institutional lenders will not bridge the purchase.

Without a firm sale, your options include:

Waiting to buy until you have a firm sale.
Making your purchase conditional on selling your current home, which some sellers will not accept.
Carrying both mortgages for a time, if your income can qualify for both payments under the lender's rules and the stress test.
Matching your closing dates so the sale closes first or on the same day.

A worked example of a bridge loan

These are illustrative figures, not a quote. You sell your current home for $900,000 and owe $400,000 on it. After the mortgage is paid off, and before real-estate commission and legal costs, about $500,000 of equity comes back to you.

Your new home costs $1,100,000 and closes three weeks before your sale. You plan to put down $400,000 and take a $700,000 mortgage. The lender advances a bridge loan of $400,000 for the three weeks.

When your sale closes, your lawyer repays the bridge loan from the proceeds. The interest you pay for those three weeks depends on the lender's bridge terms.

When institutional bridge financing does not fit

If your sale is not firm, or the gap is longer than a lender will bridge, some people use a short private loan secured on their current home. A private bridge loan costs more, carries fees, and needs a clear way to be repaid, usually the sale itself.

We explain the institutional and private options. For private lending, we refer you to Stonefield Capital, our private-lending brand.

What to do next

If you are planning a move and the dates are tight, use our call-me-back form before you sign. You can also read about buying a home with us.

Common follow-up questions

Is bridge financing expensive?

Often not, in total. Bridge financing usually costs more per day than your mortgage, and some lenders charge a set-up fee. Because a bridge loan is short, the total is often modest compared with the alternatives. Ask for the terms in writing.

What if my sale falls through after I bridge?

A failed sale is the main bridge risk. You would need another way to repay the bridge loan, which is why lenders want a firm sale and why it helps to have your lawyer review both agreements.

Do I need a bridge loan if my closings are on the same day?

Usually not. Your lawyer can apply the sale proceeds to your purchase on the same day, though same-day closings carry their own timing risks.