How do bridge loans work for sellers?
Can a bridge loan let you buy your next home before your current one sells? The answer will change how sellers in Milton, ON win in a tight market.
Why this matters
If you’re selling in Milton, Ontario, timing wins deals. Inventory is tight. Buyers move fast. A bridge loan gives sellers cash access to their home’s equity now — so you can buy before the sale closes. No contingency drama. No losing the new home because you can’t close quick enough.
What a bridge loan is — plain and simple
- Bridge loan definition: A short-term loan that ‘bridges’ the gap between buying your new home and selling your current one.
- Purpose: Cover down payment, closing costs, or mortgage payments on your new purchase while your current home is on the market.
- Term: Usually 30–180 days. Some extend up to a year.
How bridge loans work for sellers — step by step
- Decide you need liquidity: You’ve found a new house in Milton and don’t want a sale contingency.
- Talk to a lender or mortgage broker: Banks, credit unions, or private lenders offer bridge financing. A broker shops the market for the best terms.
- Apply and document: You’ll provide the purchase agreement for the new home, your current mortgage statement, proof of sale or listing, pay stubs, and a title search.
- Lender secures the loan: In Ontario the lender usually registers a charge or second mortgage against your current property (and sometimes against the new purchase). This is a legal lien on title until the bridge is repaid.
- Funds advance: You get cash (often up to a percentage of your home’s equity) to put down on your new purchase.
- Close both deals: When your existing home sells, proceeds pay off the bridge loan and registered liens are removed.
Real example (hypothetical)
- Current home market value in Milton: $800,000
- Outstanding mortgage: $500,000
- Available equity: $300,000
- Bridge loan used for new down payment: $120,000
- Bridge cost: interest + fees (explained below)
- Sale closes in 60 days, sale proceeds pay the bridge loan and remaining mortgage.
Why sellers use bridge loans (and when they make sense)
- No sale contingency: Compete with all-cash or non-contingent buyers.
- Buy faster: Move quickly on a desirable property in Milton.
- Avoid temporary rental or moving twice.
When not to use a bridge loan
- If equity is thin or house sale is uncertain.
- When interest and fees exceed your financial cushion.
- If you can get a better deal with a HELOC or home sale contingency.
Costs and fees — be clear about the math
Bridge loans cost more than a traditional mortgage. Expect:
- Higher interest rates: Often above your primary mortgage rate. Typical range depends on lender and market conditions.
- Origination or arrangement fees: A flat fee or percentage of the loan.
- Legal and registration costs: Lawyer fees to register the mortgage/lien on the Land Registry of Ontario.
- Prepayment: Usually repaid at the sale of your home; confirm if there are penalties.
Do not overlook carrying costs: mortgage payments, insurance, property taxes, utilities and potential double payments while both homes are owned.
Lien, mortgages and legal reality in Ontario
In Ontario, lenders protect themselves by registering a charge on the land title. That registration is a registered mortgage or a second charge. Key points:
- Registered mortgage = legal lien on your property until paid.
- Title search will show the bridge lender’s registered charge.
- On closing, your lawyer uses sale proceeds to discharge the bridge lien so the buyer receives a clear title.
- Full disclosure: Your realtor and lawyer must manage these liens during sale and purchase transactions.
Compare alternatives: bridge loan vs HELOC vs second mortgage vs contingency
- HELOC: Lower interest, flexible draw, but requires lender approval and may not provide enough cash fast.
- Second mortgage: Similar to a bridge loan if structured long-term. Often lower fees but longer term.
- Home sale contingency: Keep interest costs low, but sellers often lose competitive edge in Milton’s market.
Which option is best depends on risk tolerance, equity, and how quickly you must buy.
Common objections and quick rebuttals (Alex Hormozi-style directness)
- “It’s too expensive.” True. But losing a dream home or facing multiple moves can cost more. Do the math.
- “I don’t want extra debt.” This is temporary, secured against the property and repaid at closing. It’s a strategic debt.
- “I’m worried about liens.” A registered charge is normal. Use a qualified lawyer to ensure the discharge happens at closing.
How sellers in Milton get approval faster
- Work with a mortgage broker who knows Milton lenders.
- Provide a signed Agreement of Purchase and Sale for the new home.
- Have a clear listing and proof of market activity for your current home (showings, offers, pre-listing assessment).
- Use a local lawyer experienced with Ontario land title registration to speed discharge at closing.
Local market smart moves — Milton, Ontario specifics
- Milton is part of the Greater Toronto Area catchment. Buyers act fast. You need speed if you want a new property.
- Use bridge financing to remove sale contingency and make offers stronger.
- Know your neighborhood comps: neighborhoods like Dempsey, Main St., and Old Milton attract quick buyers in certain price bands. Work with a local realtor to price aggressively and reduce days on market.
- Property tax and Land Transfer Tax timing: Plan for closing costs and taxes. A bridge loan can cover some of these short-term needs.
Risk management — how to protect yourself
- Get full cost disclosure from lenders: APR, fees, penalties.
- Confirm lender will release charge promptly at sale closing.
- Use a lawyer to coordinate discharge and ensure buyer receives clear title.
- Run conservative sale scenarios: best-case, expected, and worst-case timelines.
A seller’s checklist for using a bridge loan in Milton
- Meet a mortgage broker or lender experienced in bridge financing.
- Get an appraisal or BPO to confirm equity.
- Secure the new property with a clear offer and timeline.
- Engage a local real estate lawyer for title and discharge logistics.
- Prepare for carrying costs and contingency plans if sale takes longer.
- Confirm repayment plan and verify any prepayment penalties.
Why trust a local authority
You need somebody who knows Milton market movement, local lender appetite, typical lender requirements, and which lawyers move fast on title discharges. That’s the difference between a bridge that works — and one that clogs the closing.
Contact and next step
For precise numbers, lender options, and a custom plan for your timing in Milton, speak with Tony Sousa. He’s a Milton realtor who works with mortgage brokers and local lawyers to make bridge financing smooth:
- Email: tony@sousasells.ca
- Phone: 416-477-2620
- Website: https://www.sousasells.ca
FAQ — Quick answers sellers ask most (Milton-focused)
Q: Can I get a bridge loan if my home isn’t yet listed?
A: Sometimes. Lenders prefer proof of sale or listing history. A signed purchase agreement for the new home helps most.
Q: Will a bridge loan show up as a lien on my title?
A: Yes. Lenders register a charge or second mortgage on the property title in Ontario until it’s repaid.
Q: How much of my equity can I access?
A: That depends on lender policy and your mortgage. Many lenders advance a percentage of available equity — commonly 60–80% of the net equity after existing mortgages.
Q: How fast can I get funds?
A: If documentation is in order, some lenders can advance funds in days to a few weeks. Use a mortgage broker to speed the process.
Q: Is a bridge loan the same as a second mortgage?
A: Similar in security, but bridge loans are short-term and designed to be repaid at sale. Second mortgages can be longer term with different rates and costs.
Q: What if my house doesn’t sell in time?
A: You’ll carry the bridge loan longer, increasing interest and fees. Mitigate this risk by pricing correctly, working with a strong realtor, and building a buffer into the repayment plan.
Q: Are bridge loans common in Milton?
A: Yes. In competitive markets around the GTA, bridge financing is a common tool for sellers who must move quickly.
Q: Can I use a HELOC instead?
A: If you have an existing HELOC with available credit, it can be cheaper. But banks often limit HELOC advances based on credit limits and lender policy. A bridge loan can be faster and larger.
Final word
Bridge loans are a tool — not a guarantee. Used wisely, they let Milton sellers buy the right home now and sell on their timeline. Use a local expert who knows lenders, lawyers, and market timing. When you’re ready to move fast and win, call Tony Sousa: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
