How It Works, When to Use It, and What to Watch For

If you’re buying your next home before your current one closes, you may find yourself in a tricky spot – needing the money from your sale to fund your purchase. That’s where bridge financing comes in.

Bridge financing is a short-term loan that helps “bridge the gap” between the closing date of your current home and the possession date of your new one. It gives you access to your home’s equity before your sale officially closes, so you can complete your purchase without stress or delays.

How Bridge Financing Works

Bridge loans are offered by many major lenders and are usually available for a few days to a few months, depending on your closing timeline.

Here’s a simple example:
You’ve sold your current home, but the closing date is August 30th. The home you’re buying closes on August 15th. That two-week gap means your down payment funds aren’t available yet. With bridge financing, your lender temporarily lends you the money you’ll receive from your sale so you can close on your new home first.

Once your sale closes, the bridge loan is repaid automatically, usually directly out of the sale proceeds handled by your lawyer.

When Bridge Financing Makes Sense

Bridge financing can be incredibly helpful when:

• Your purchase closes before your sale, and you need short-term funds for your down payment.
• You want flexibility with closing dates to make your move less rushed.
• You’re buying a new-build home and need to secure your next property before your current home is sold.
• You want to avoid making your offer conditional on selling your home, which can make your offer more appealing to sellers.

What to Consider

While bridge financing can reduce stress, it’s important to understand the details:

• Interest Rates: Bridge loans typically have slightly higher interest rates than traditional mortgages since they’re short-term.
• Loan Limits: Most lenders will only bridge if you have a firm sale agreement in place on your current home — they need proof the funds are coming.
• Timing: The loan period must fall within a short window, often up to 90 days.
• Costs: Expect to pay a small set-up fee plus interest for the days you use the loan. It’s usually minor compared to the convenience it provides.

Your lender or mortgage broker can calculate the exact cost and confirm whether your situation qualifies.

Give Yourself a Buffer Between Closings

While bridge financing is useful for covering the gap between your purchase and sale, we highly recommend leaving at least a couple of days between the two closing dates whenever possible.

Many people try to close both homes on the same day to avoid paying interest on a bridge loan, but this can be risky. If one deal is delayed even by just a day, it can create a domino effect where the next buyer can’t close on their purchase, and the entire chain of transactions grinds to a halt.

When this happens, it’s extremely stressful for everyone involved, and in rare cases, it can even lead to legal issues or breach-of-contract claims if deadlines aren’t met.

Why a Sale Might Be Delayed

Even with the best planning, closings can fall behind schedule for reasons outside your control, such as:

• Delays in mortgage funding or lender approvals
• Wire transfers arriving late due to banking cut-off times
• Paperwork errors or missing signatures
• A lawyer’s office backlog at month-end
• Last-minute title or insurance issues

By giving yourself a 1–3 day gap, you build in breathing room, ensuring you have time to handle any surprises without jeopardising your purchase or sale.

The Bottom Line

Bridge financing can be a lifesaver when your move-out and move-in dates don’t align perfectly. It helps you transition smoothly without juggling temporary accommodations or worrying about missed deadlines.

If you’re planning to buy and sell at the same time, talk to your lender early to explore your bridge financing options. Your GoWylde agent can also help coordinate timelines and connect you with trusted mortgage professionals to ensure a seamless move from one home to the next.