A short-term bridge loan covers a temporary gap in your finances, most often between buying a new home and receiving the sale proceeds from your current one. It exists for one reason: to get you across a timing problem without forcing a bad sale or losing a purchase.
When a bridge loan makes sense
- You are buying before your current home has sold, or before the sale proceeds arrive
- A sale has firmly closed but funds are delayed
- You need a deposit or closing funds while other financing is finalized
- An estate or other asset is about to release funds, but you need money now
- A renovation or purchase timeline does not match your refinance date
How a bridge loan works
- We look at the property or properties, the equity available and the specific event that will repay the loan.
- A lender advances funds against the property, usually as a first or second mortgage.
- You pay interest for the actual number of days the loan is outstanding.
- When the sale closes or the funds arrive, the bridge loan is paid out and closed.
Understanding per diem interest
Bridge financing is short, so the cost is most clearly understood as a daily figure: the loan amount multiplied by the annual rate, divided by 365. Multiply that by the number of days you need the loan to see the interest cost. The Bridge Loan Calculator shows your per diem, the total mortgage amount including fees, and the interest over your expected term.
Fees and costs
Besides interest, expect a broker fee, legal fees and an appraisal, depending on the structure. Fees are normally paid from the proceeds, so the loan is a little larger than the cash you need. Because the term is short, fees weigh heavily against the loan, which is why a bridge loan should only be used when the timing problem is real.
The exit plan is everything
A bridge lender wants to know exactly how and when it will be repaid. A sale with conditions removed and a firm closing date is a strong exit. A sale that has not yet been listed, or a refinance that depends on approvals not yet given, is a weaker one. If the exit slips, costs keep running daily, so we plan for delays before recommending a bridge.
If you need a longer term, consider a second mortgage. If a bank has already said no, read Declined by a Bank or A Lender.
Frequently asked questions
How long is a typical bridge loan?+
Bridge loans are short by design, often only weeks and commonly under about two months, though the length depends on the transaction. The term should match the specific event that will repay the loan.
What is a per diem?+
Per diem means per day. For a bridge loan it is the daily interest cost: the loan amount times the annual rate divided by 365. It makes the true cost of a short loan easy to see.
What happens if my sale falls through or is delayed?+
Interest continues to accrue each day, and the lender may require a plan to repay from other sources or to extend the loan on new terms. That risk is why we look closely at the strength of your exit before arranging a bridge.
Can I get a bridge loan without selling my current home?+
Sometimes, if there is another clear source of repayment such as a firm refinance, an incoming inheritance or a sale of another asset. Each file is judged on the certainty of the exit.
Are bridge loans expensive?+
The rate is higher than a bank mortgage and there are fees, but the loan is outstanding for only a short time. The cost is worth it only when it saves a purchase or avoids a costly forced decision. The calculator shows an estimate before you commit.
NOW Mortgage is a RECA-licensed brokerage operating under Dependable Mortgage Solutions Corp. Call 587-200-6727 or email lending@nowmtg.ca. Information on this page is general in nature and is not a commitment to lend. Financing is subject to lender approval, property assessment and final documentation. OAC.