Mortgage Bridge Loan Basics

By : Mits Kantaria

If you’re like many Canadian homeowners, the home that you live in today won’t be the last one that you buy. People move cities, they need larger homes as their families grow, some move to more luxurious homes when their financial situation is right, others downsize. Whatever the reason, moving from the home you own to a new home can be challenging. A mortgage bridge loan, as the name implies, is designed to bridge the gap between one home and another.

Learn how mortgage bridge loans work, the advantages they offer, and how you can get a bridge mortgage with the best terms through a licensed Canadian mortgage broker.

What is a Mortgage Bridge Loan?

When you’re ready to move for whatever reason, you’ll need to list your home on the market. Your home is likely your biggest financial asset. It’s also one that is difficult to leverage when it comes to moving.

You’ll be left in an awkward situation where you need to close on the sale of your current home before you can apply the equity to the purchase of your next home. A mortgage bridge loan is designed as a short-term lending product that will provide the funding you need to purchase your next home while you wait for the sale to close.

You can use a mortgage bridge loan for the down payment on your second home. All that equity tied up in your first home will no longer be a problem. You’ll be free to move on to the next stage in life, with all of the exciting personal journeys that come with it.

When Should You Apply for a Bridge Mortgage?

You can apply for a bridge mortgage any time that you are preparing to move from one home to another. There’s typically a limit on what you can borrow but this isn’t set in stone, especially when you work with a mortgage broker that has access to more lenders on the market. Most bridge loans are capped at a term of four months.

Rates are typically competitive (although higher than standard mortgages) because the bridge mortgage will be secured by the home that you’re selling.

Bridge mortgages are convenient and commonplace. They are offered by all of the major banks as well as B Lenders in some cases. While it’s possible to explore the market yourself, comparing different bridge mortgages and going through the application process can be stressful and overwhelming, especially when you are in the process of selling your home and working out the details of your next one.

Choosing to work with a broker for a bridge mortgage will free up your time and ensure that you get the most competitive offer with a term and rate that works for you.

What Are Some Things to Consider Before Applying for a Bridge Loan?

You’ll need to meet some specific criteria to qualify for a bridge loan with a regulated lender. Both the sale agreement for the current property and the purchase agreement for your new property will be required. Some large lenders will also subject you to a financial stress test depending on your situation and any history you have with the bank or other lenders in the credit network.

There are mortgage bridge loans available through private lenders. The approval criteria are more relaxed, but the interest rates are higher. This may be necessary depending on your current situation. Because mortgage bridge loans are short-term, a higher interest rate is somewhat mitigated.

If you need to apply for a mortgage bridge loan through a private lender, you will need to work with a licensed mortgage broker. At Mortgage Capital Investment, we will take time to understand your financial situation and recommend the best product based on your needs and eligibility.

How a Mortgage Broker Can Help You Get the Best Mortgage Bridge Loan

A mortgage broker is your advocate for more affordable bridge mortgages. Brokers maintain vast networks of lenders, including unconventional lenders and private lenders, to ensure that all individuals and families have options.

You’ll only need to submit your application once. Your broker will find the most favorable bridge loan that suits your needs.

Start Your Consultation with Mortgage Capital Investment

If you need a bridge mortgage to take your next step, talk to Mortgage Capital Investment. We are a licensed mortgage brokerage and can find the best solutions for your unique financial scenario. A bridge mortgage is a powerful type of lending product that can make your transition between homes stress-free. Simplify the process even more by contacting us today to start your bridge mortgage consultation.

Lowest Residential Mortgage Rates in Canada*

Term OUR RATE TD Bank Rate
3 Year Fixed/ 25 yrs 4.99%Promo 5.51%
4 Year Fixed/25 yrs 5.04% Promo 5.52%
5 Year Fixed/ 25 yrs 4.94% Promo 5.14%
5 Year Variable/ 25 yrs 6.15% Promo 6.19%
5 Year Fixed/ 30 yrs 4.99% Promo 5.72%
5 Year Variable/30 yr 6.29% 6.29%
3 Year Fixed/30yr 5.19% Promo 5.81%
**NEW RENTAL 5 Year Fixed /30yr 5.09% Promo 5.77%

Updated: May07 , 2024

* Current promotion rates may provide an additional 0.05% discount or may be anytime discontinued at the Lender discretion.Some condition may apply.Rates may vary between geographic regions and the posted rates on this website may not be available in your area.TD Bank rate used for comparable are the rate listed in the Broker Chanel Portal by TD Canada Bank at the date above. Please contact our MCI office for more details and current promotions.

LOWEST REGULAR RATES IN CANADA*   * Current promotion rates may provide an additional 0.10% discount. Rates may vary between geographic regions and the posted rates on this website may not be available in your area. Please contact our MCI office for more details and current promotions.

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