Bridge Financing

Bridge financing is a short-term loan that covers the gap when a buyer's new home completes before the proceeds from their existing home are received — for example, the new purchase completes June 1 while the existing home completes June 15. The lender advances funds secured against the equity in the property being sold, allowing the new purchase to complete on time. Costs typically include a setup fee plus daily interest calculated at prime rate plus a lender margin, for the duration of the bridge period.

Yes, in practice the vast majority of BC lenders require a firm, unconditional sale contract on the borrower's existing property before they will approve bridge financing. Lenders rarely extend bridge loans against an unsold listing because the repayment date and amount are uncertain without a confirmed sale. Borrowers should confirm their specific lender's requirements early in the transaction, as policies can vary between financial institutions.

Bridge loan interest in BC is generally calculated on a daily basis for the number of days the loan is outstanding, using a rate expressed as the lender's prime rate plus a negotiated margin. In addition to interest, lenders commonly charge a one-time setup or administration fee at the time the bridge facility is established. Because costs accumulate daily, borrowers should confirm the exact rate and fee structure with their lender before relying on bridge financing.

Under the Real Estate Services Act (RESA) and the rules administered by the British Columbia Financial Services Authority (BCFSA), a licensee must act in the best interests of their client and disclose all known material information about a transaction. If bridge financing introduces a material risk — for example, if the borrower's existing sale falls through — the licensee should ensure the client is aware of the implications, though arranging or advising on the loan itself is outside a licensee's permitted scope of practice. Licensees must not provide mortgage advice unless they also hold the appropriate mortgage broker licence under BC legislation.

Bridge financing itself does not create a separate Property Transfer Tax liability, as PTT under the BC Property Transfer Tax Act is triggered by the registration of a taxable transaction — namely the transfer of a registered interest in land. The purchaser's PTT obligation arises on the completion date of the new purchase, not from the bridge loan. However, the need for bridge financing can affect a buyer's ability to access exemptions such as the First-Time Home Buyers' Program or the Newly Built Home Exemption, which have their own eligibility criteria under the Property Transfer Tax Act.

If the sale of the existing property collapses — for instance, because a condition is not waived or the buyer defaults — the bridge loan does not automatically disappear; the borrower remains liable to the lender for the advanced funds plus accruing interest. The borrower would need to arrange alternative financing or negotiate with the lender, as the security for the bridge loan is typically a charge against the unsold property. This scenario underscores why lenders require a firm, unconditional contract before advancing bridge funds.

Yes, bridge financing can be used when purchasing a strata lot under the Strata Property Act (SBC 1998, c. 43), provided the borrower meets the lender's standard bridge financing criteria, including holding a firm sale contract on their existing property. The strata context does not change the fundamental structure of the bridge loan, though buyers should be aware that strata-related documents such as the Form B Information Certificate or depreciation report may affect their overall financing picture. Completion dates on strata lot purchases must be coordinated carefully so the bridge period and associated costs remain manageable.

In a BC Contract of Purchase and Sale, the completion date is when legal title transfers and funds must be delivered, while the adjustment date is when financial responsibility for the property shifts to the buyer. Bridge financing is structured around the completion date of the new purchase and the expected completion date of the existing sale, with the lender advancing funds sufficient to cover the purchase price shortfall during that gap. Accurate completion dates in both contracts are essential, because any delay in the existing sale's completion extends the bridge period and increases the borrower's interest costs.

Yes, but the collection, use, and disclosure of a borrower's personal information must comply with British Columbia's Personal Information Protection Act (PIPA), which requires that personal information be collected only for purposes a reasonable person would consider appropriate and that consent be obtained. Lenders and brokers must tell borrowers why their information is being collected and may not use it beyond those stated purposes without fresh consent. Borrowers who believe their personal information has been mishandled can file a complaint with the Office of the Information and Privacy Commissioner for BC.

When a property owner dies during an ongoing transaction, the Wills, Estates and Succession Act (WESA) of BC governs the administration of their estate, including the authority of the executor or administrator to complete or unwind real estate transactions. The bridge loan would become a liability of the estate, and the executor would be responsible for ensuring it is repaid from estate assets, which may include the proceeds of the property being sold. Legal advice from a BC estates lawyer should be sought promptly, as delays in completing either transaction can increase bridge interest costs and complicate the estate administration.