Bridge Loan
Bridge Financing
Canadian mortgage term definition with formula, examples, and limits used by mortgage brokers.
Definition
Short-term loan (1-6 months) used when a buyer closes on a new property before selling their existing one. Covers the down payment gap between purchase and sale.
Example
New home closes June 1, existing home sells July 15. Bridge loan covers $200K down payment for 45 days.
Related Terms
GDSMonthly housing costs divided by gross monthly income. Includes mortgage payment, property tax, heating, and 50% of condo fees.TDSAll monthly debt payments divided by gross monthly income. Includes housing costs plus credit cards, car loans, lines of credit, and other debts.LTVTotal mortgage debt divided by property value. Determines if CMHC insurance is required and which lenders qualify.CMHC InsuranceMandatory mortgage default insurance required when down payment is less than 20% (LTV > 80%). Enables up to 95% LTV financing.Stress TestBorrowers must qualify at a higher interest rate to ensure affordability if rates rise. Calculated as the maximum of contract rate + 2% or 5.25%.
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