Bridge Loans Explained: Close More Deals With This Secret Tool

Most realtors hear “bridge loan” and think they already know what it is. They picture a short-term loan that covers a down payment while someone waits for their old home to close.

That’s true. But it’s only half the story.

The way most investors and agents use bridge loans leaves a ton of deals on the table. Here’s the full picture — and how you can use it to close deals that would otherwise fall apart.

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What Most People Think a Bridge Loan Is

Here’s the common version: you’re buying a new home, but your old one hasn’t closed yet. You need that sale money for your down payment. So your lender gives you a short-term bridge loan to cover the gap.

Simple. Most people know this one.

But I want to show you two more ways bridge loans work — one on the residential side, one on the commercial side — that most realtors and investors have never heard of. And both of them can save deals that would otherwise die.

The Residential Bridge Loan Most Agents Don’t Know About

Here’s the scenario. Your buyer wants to purchase a new home. Their current home is listed but hasn’t sold yet. And here’s the problem: their income doesn’t support carrying both mortgages at the same time.

With a traditional lender, that deal is dead.

With a bridge loan through an alternative lender? It’s alive.

Here’s how it works:

• The alternative lender gives your buyer one loan that covers both properties — as long as the total amount stays within the lender’s loan-to-value limits.
• Your buyer moves into the new home right away. It doesn’t matter that the old one hasn’t sold.
• These loans are typically open, meaning the borrower can pay them off at any time with no penalty.
• Bridge loans on the residential side can run one to two years — giving the old property time to sell at the right price instead of a desperate fire-sale price.

When the old home sells, you take the proceeds and pay down the bridge loan as much as possible. Whatever balance is left, you convert it into a traditional mortgage — ideally with an A lender if the borrower qualifies.

Yes, bridge loans cost more. The rates are higher. There are lender fees and broker fees. But here’s the trade-off: your buyer gets the home they want today, and their old property gets the time it needs to sell properly.

Properties do sell when they’re priced right. Sometimes they just need a few more weeks or months. A bridge loan buys that time.

If your buyer can’t carry two mortgages at once and the deal is about to die, that’s exactly what a residential bridge loan fixes — book a free strategy call with LendCity and we’ll run the numbers to see if it makes sense for their situation.

Commercial Bridge Loans: The Investor’s Secret Weapon

On the commercial side, bridge loans work differently — and they’re incredibly powerful for the right situations.

Here’s the classic scenario: an investor wants to buy a multifamily property. But the building is vacant. Or it needs major renovations. Or it’s only half occupied.

A traditional bank looks at that deal and says no. Why? Because the cash flow isn’t there to support the debt. No income, no loan.

A commercial bridge lender looks at it differently. They’re not focused on what the property earns today. They’re focused on the exit strategy — what the property will look like once the investor does their work.

They lend based on loan-to-value and the investor’s plan, not just current income. That opens the door for deals that banks won’t touch.

Here’s how the typical commercial bridge play works:

1. Investor buys a vacant or distressed multifamily property using a bridge loan.
2. Investor renovates, adds units, or fills vacancies — whatever the value-add strategy is.
3. Once the property is stabilized and cash-flowing, the investor refinances into traditional financing — conventional or CMHC, depending on the situation.

That’s the bridge. You’re bridging the gap between what the property is now and what it will be.

I’ve seen investors use this exact strategy to take a vacant 8-unit building, renovate it completely, fill it with tenants, and refinance into a CMHC-insured mortgage at much better rates. The bridge loan made the whole thing possible.

When Should You Use a Bridge Loan?

Bridge loans aren’t for everyone or every deal. Here’s a quick breakdown:

Use a residential bridge loan when:

• Your buyer wants to purchase before their current home sells
• Their income doesn’t support carrying two mortgages simultaneously
• The existing home is listed and priced to sell — it just needs more time

Use a commercial bridge loan when:

• The property is vacant, partially occupied, or needs significant renovation
• A traditional lender declines because cash flow doesn’t support the debt
• You have a clear value-add plan and a defined exit strategy (refinance or sale)

Don’t use a bridge loan when:

• You have no clear plan to pay it off — these are short-term tools, not long-term solutions
• The costs outweigh the benefit of moving faster
• You’re hoping the market saves you instead of having a real strategy

I’ve seen investors take a vacant 8-unit building, renovate it, stabilize it, and refinance into CMHC — the whole thing funded by a commercial bridge loan — schedule a free strategy session with us and we’ll map out whether that same play works for your deal.

The Numbers You Need to Know

Bridge loans cost more than traditional financing. That’s the reality. Here’s what to expect:

• Interest rates are higher than A lender rates — typically in the range that reflects the added risk and flexibility
• Lender fees apply, and so do broker fees
• Loan-to-value limits vary by lender and deal — every file is different
• Loan terms on residential bridge loans typically run 1–2 years
• Open loans mean no prepayment penalty when you’re ready to pay off or refinance

The exact numbers depend on the borrower’s credit, the property, the location, and the risk profile of the deal. There’s no one-size-fits-all answer here. That’s why you work through the strategy with a broker who does these deals regularly.

The cost is real. But so is the cost of losing a deal, sitting on an unsold property, or passing on a value-add opportunity because traditional financing said no.

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Frequently Asked Questions

Written by

LendCity

Published

March 2, 2026

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7 min read

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Mortgage Basics Investment Strategy Rental Properties Value Add Multifamily

Key Terms

Bridge Loan

Bridge Loan

A bridge loan is a short-term financing solution that allows Canadian real estate investors to access the equity in their existing property to fund the purchase of a new property before the current one has sold. It "bridges" the gap between the closing date of a new purchase and the sale of an existing property, typically carrying higher interest rates and lasting from a few weeks to several months.

Alternative Lender

Alternative Lender

An alternative lender is a non-traditional financing source, such as a mortgage investment corporation (MIC), private lender, or trust company, that provides loans outside of the conventional bank lending system. For Canadian real estate investors, alternative lenders are valuable when deals don't qualify for traditional financing due to credit issues, unconventional property types, or the need for faster, more flexible lending terms.

Loan To Value (LTV)

Loan-to-Value (LTV)

Loan-to-Value (LTV) is the ratio of your mortgage amount compared to the appraised value of the property, expressed as a percentage. For Canadian investors, a lower LTV generally means better mortgage rates and terms, while properties with an LTV above 80% typically require CMHC mortgage insurance, which adds cost but allows for smaller down payments.

Exit Strategy

Exit Strategy

An exit strategy is a predetermined plan outlining how a real estate investor intends to dispose of or transition out of a property investment to realize profits or minimize losses, such as selling, refinancing, converting to a different use, or transferring to a long-term hold. For Canadian investors, having a clear exit strategy is especially important when dealing with short-term financing like private mortgages or bridge loans, as lenders typically require borrowers to demonstrate a viable plan for repaying the loan within the term.

Open Loan

Open Loan

An open loan is a mortgage that allows the borrower to repay part or all of the outstanding balance at any time without incurring prepayment penalties. For Canadian real estate investors, this flexibility is valuable when planning to sell a property or refinance quickly, though open loans typically carry higher interest rates than closed mortgages in exchange for that freedom.

CMHC Financing

CMHC Financing

CMHC Financing refers to mortgage loans insured by the Canada Mortgage and Housing Corporation, which allows borrowers to purchase properties with a down payment as low as 5% by protecting lenders against default risk. For real estate investors, this government-backed insurance enables access to higher loan-to-value financing on qualifying properties, though it typically applies to owner-occupied or small multi-unit residential properties rather than purely investment purchases.

Value Add Property

Value-Add Property

A property with potential to increase value through renovations, better management, rent increases, or adding units.

Hover over terms to see definitions. View the full glossary for all terms.