Real Estate Bridge Loan Mortgage Financing.

Bridge Loans.

Institutional & Private Mortgage Bridge Loans.

Ontario, British Columbia & Nova Scotia.

"Bridge loans made simple."

Bill S.

Hamilton Real Estate Investor

Bridge Loans
Bridge Loan Mortgage Financing Lender

What is a bridge loan?

Need a Bridge Loan?

A bridge loan, or bridge financing, is generally defined as a short-term financing facility. Most commonly, in the context of real estate, a bridge loan, or a bridge mortgage loan, is used to help finance the purchase of a property, before the sale of an existing property that is not yet listed for sale or sold. Keep in mind that the property not yet listed for sale or sold has the buyer’s down payment locked up, whereas if this property is to either sell before or on the closing date of the new purchase, the buyer would have access to this equity. In other words, a bridge loan can help someone purchase a property before the sale of their current property closes. DV Capital provides homeowners and real estate investors with bridge loans across Ontario, British Columbia & Nova Scotia. 

Types of Bridge Loan Mortgages.

Private Mortgage Bridge Loans.

Generally speaking, there are typically three situations whereby bridge loan mortgage financing may be required:

1) The existing property is listed for sale and has sold firm (without conditions). This provides bridge loan lenders with the highest degree of confidence that their bridge loan will be repaid given that there is a firm sale with a tangible closing date. Granted, there is always a risk that the purchaser default on closing, there is a lesser degree of calculated risk compared to the other situations. For this reason, traditional lenders, subject to underwriting requirements, provide the lower available bridge loan rates. 

2) The existing property is listed for sale without a firm sale (the property is merely listed for sale). In comparison to the bridge loan example as discussed above, the property is listed for sale, without any tangible assurance that the property will sell and for what price. 

3) The existing property is not listed for sale. As compared to the other bridge loan examples, a potential bridge loan lender has zero tangible evidence that the existing property will be listed, much less sold. 

Depending on the clients income and credit profile, as well as the time between the purchase and sale closing dates, traditional bridge lending may not be possible, whereas a private mortgage bridge loan may provide a greater degree of flexibility in Ontario, British Columbia & Nova Scotia.

Bridge Loan Mortgage Financing Lender
How Does A Bridge Loan Work?

How does a bridge loan work?

Bridge Loan Financing in Canada.

Let’s use the example that our clients wish to sell their Toronto home to downsize to a home in Muskoka. Our clients entered into contract to purchase the Muskoka home with a closing date of 120 days. Our clients intended to complete renovations to their Toronto home, to achieve a maximum list & sale price, however, there have been unforeseen delays with the home renovations, resulting in a significant delay in the list & sale process. Weeks away from the Muskoka property closing date, it becomes unfortunately clear that the Toronto property will not be sold before the Muskoka home purchase closing date. This creates an issue as the clients can’t access or use the sale proceeds of the Toronto home to purchase their new home in Muskoka. Our clients can come up with a modest amount of money from their savings but nowhere near the amount required to complete the Muskoka home purchase Based on the Muskoka home purchase price, the value of the Toronto home and the balance of the existing mortgage, the clients qualified for a bridge loan financing for 100% of the purchase price that will be registered in 1st position on the Muskoka home and cross-collateralized in 2nd position behind the existing 1st mortgage on the Toronto home. In some cases, bridge financing is referred to as a ‘blanket mortgage‘ as one mortgage is registered, or blanketed, against multiple properties. This blanket structure provides the mortgage lender with sufficient collateral as a result of the aggregate home equity between both properties.  

Bridge Loan Example.

How to Apply for a Bridge Loan Mortgage.

Existing Property:
Location: Toronto, Ontario
Anticipated Sale Price: $2,000,000
Existing 1st Mortgage: $500,000

Purchase Property:
Location: Muskoka, Ontario
Purchase Price: $1,500,000
Deposits Paid to Seller: $50,000
Amount Needed to Close: $1,450,000
Loan Amount: $1,450,000

Bridge Loan Repayment:
Toronto Sale Proceeds: $1,880,000 (Net of Fees + HST)
Discharge Bridge Loan: $1,450,000
Net to Client: ~$437,000

In this example, the clients used their own savings to help with purchase closing costs such as land transfer tax and legal fees. The bridge loan was registered as a 1st mortgage on the Muskoka home and cross-collateralized in 2nd position behind the existing 1st mortgage on the Toronto home. Upon the sale of the Toronto home, the bridge loan is discharged from both homes, funds are repaid to the bridge loan lender & the clients will reside in Muskoka mortgage-free. 

Bride Loan Mortgage Financing Example
How Are Bridge Loans Repaid?
How is a bridge loan repaid?

Can I Get a bridge loan if my house isn't sold?

In the context of a bridge loan involving real estate, whereby the bridge loan facilitates the purchase of a property that is scheduled to close before the sale of the existing property, a bridge loan is typically repaid from the sale proceeds of the existing property. This is a standardized condition, however, it is possible, with a private mortgage bridge loan, depending on the equity in the property, that the lender might allow a partial pay-down and keep a balance on the purchase property. It is important to note that in most cases, the interest rate with a bridge loan is higher than the interest rate that the same lender would charge on a traditional mortgage, hence the short-term nature of a bridge loan product. DV Capital will help you assess your mortgage bridge loan requirements for the acquisition of residential, commercial and industrial real estate in Ontario, British Columbia & Nova Scotia. 

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