Buying a new home before selling your current one can be a stressful financial juggling act. This is where bridge mortgages come in — a financial tool designed to “bridge” the gap between buying a new property and selling your existing one. Understanding how bridge mortgages work, their costs, and their benefits is essential before deciding if this solution is right for you.
Here are 7 key things everyone should know about bridge mortgages to make an informed decision.
1. What is a Mortgage Bridge Loan
A mortgage bridge loan, also known as bridging finance, is a short-term loan that allows homeowners to access funds to purchase a new property before selling their current home. Essentially, it “bridges” the financial gap, providing temporary funding until the proceeds from your existing property sale are available.
Bridge loans are especially useful in competitive real estate markets, allowing buyers to act quickly and secure a new home without waiting for the sale of their current property.
2. How Bridge Mortgages Work
Bridge mortgages work by leveraging the equity in your existing property. Lenders provide a loan based on a percentage of your home’s current value, which can then be used as a down payment for your new property. These loans are typically short-term, ranging from a few months to a year, depending on how quickly you expect to sell your current home.
Because they are short-term loans, bridge loan rates are often higher than traditional mortgage rates. It’s important to weigh the cost of borrowing against the benefits of securing a new home without delay.
3. Costs Associated with Bridging Finance
One of the most common questions homeowners have is how much do bridging loans cost. Costs typically include:
- Interest rates charged on the borrowed amount
- Setup or arrangement fees
- Legal and administrative costs
The total cost can vary depending on the lender, the amount borrowed, and the term of the loan. For example, how much does bridging finance cost will differ if you are using a large portion of your home’s equity or if you need a longer loan term. Understanding all associated fees beforehand is critical to avoid surprises.
Also read: Should You Use Home Equity to Consolidate Debt in 2026?
4. Options with Major Lenders
Several major banks and financial institutions in Canada offer bridge financing solutions. For instance, bridging finance TD provides a way for homeowners to access funds while transitioning between properties. Similarly, bridge financing TD Canada Trust offers flexible options tailored to individual needs. Working with reputable lenders ensures that the loan is structured professionally and in line with current financial regulations.
Private lenders and mortgage brokers can also help you navigate various bridge financing TD options, allowing you to compare terms, interest rates, and repayment plans.
5. Factors Affecting Bridge Loan Rates
When considering a bridge mortgage, it’s important to understand what affects the cost. Bridge loan rates are influenced by factors such as:
- The amount of equity in your current property
- The value of the property you are buying
- Your credit history and overall financial profile
- The term length of the loan
Higher equity and stronger credit profiles can often lead to more favorable terms, while riskier profiles may face higher rates or stricter conditions. A mortgage advisor can help you evaluate your options and find a rate that works best for your situation.
6. Benefits and Risks of Bridge Mortgages
Benefits of bridge mortgages include:
- Quick access to funds for a new property
- Avoiding the pressure of coordinating simultaneous sale and purchase
- Flexibility in competitive housing markets
Risks include:
- Higher interest rates compared to conventional mortgages
- The pressure of repaying the bridge loan within a short period
- Potential complications if your current home takes longer to sell than expected
By understanding both the advantages and risks, you can make a more informed decision about whether a bridge mortgage fits your financial plan.
Also read: When Should You Refinance Your Mortgage?
7. How to Get Started
Getting started with a bridge mortgage begins with consulting a trusted mortgage advisor. They can explain the different types of bridging finance available, calculate costs, and help you determine the best approach for your situation.
A professional mortgage broker can also help answer specific questions, such as:
- What is a mortgage bridge loan?
- How much do bridging loans cost?
- Which lenders offer the most competitive rates?
Working with experts ensures you have a clear understanding of your obligations and helps secure a bridge mortgage that aligns with your goals.
Final Thoughts
Bridge mortgages are an excellent tool for homeowners looking to transition between properties without financial stress. We provide the flexibility to purchase a new home before selling your current one, but they come with costs and responsibilities that must be carefully considered.
If you’re thinking about a bridge mortgage, AKAL Mortgages is here to help. As trusted mortgage brokers, we guide you through the process, connect you with reputable lenders, and ensure you understand all terms and costs. Book your appointment today with us to explore the best bridge financing solutions for your needs.