Bridge Financing & Mortgage Porting, Explained
Buyer Guide
Bridge Financing & Mortgage Porting, Explained
When your purchase closes before your sale does, you need a financial bridge between the two dates. Canada has two main tools: bridge financing and mortgage porting. They solve different problems — here is how each works, what it costs, and who qualifies.
01 What bridge financing is
A short-term loan secured against the equity in your current home. It covers the “down payment gap” — not the whole purchase. Example: your new home needs a $165,000 down payment, you’ve paid a $17,500 deposit, and your old home’s proceeds haven’t arrived yet — the bridge covers roughly the $147,500 in between. The day your sale closes, the bridge is repaid in full.
02 The real cost: scary rate, modest bill
Bridge rates run higher than a regular mortgage — typically Prime + 2% to 4% (some lenders higher). But interest is calculated daily and charged only for the days you hold the loan: Interest ≈ Loan × Annual Rate × Days ÷ 365. Illustration: a $100,000 bridge held 31 days costs roughly a few hundred dollars in interest — not thousands — plus a few hundred in admin fees. The term is short, so the total stays modest. The rate is expensive; the bill usually isn’t.
03 The hard gate: no firm sale, no bank bridge
Mainstream banks (A-lenders) have one hard requirement: your current home must be sold firm — all conditions waived, with a confirmed closing date. The lender needs to know exactly when the advance will be repaid. Home not sold yet, or still conditional? Banks typically decline — leaving private lenders at 7%–15% with much heavier fees. Safest order: sell firm first, then arrange the bridge.
04 Porting: move your mortgage to the new home
Porting moves your existing mortgage — rate, remaining term, and balance — to your new property. It suits anyone whose contract rate is below today’s market: you keep the low rate and avoid the prepayment penalty for breaking the mortgage. Note: usually only fixed-rate mortgages are portable (variable-rate mostly isn’t), and porting happens mid-term — at renewal you simply pick a new product.
05 Trading up: blend and extend
Buying a pricier home and need more funds? The lender blends: your old balance at its original rate plus the new money at today’s rate, weighted into one blended rate — and the term often resets (e.g., back to 5 years). Example: $220,000 at 2.1% plus $80,000 new at 2.8% → the blended rate on the full $300,000 lands between the two. That’s the “discount” math — a weighted average, nothing mysterious.
06 Trading down: the gap may cost you
Moving to a cheaper home and shrinking the loan? The lender may charge a prepayment penalty on the reduced portion. Ask about the penalty and how much of your prepayment privilege can offset it before you decide. Porting isn’t free either: the lender re-qualifies your income and credit, the new property must meet its lending criteria, and the gap between closings usually must fall within a 30–90 day window (some lenders allow 120) — miss it and you’ve effectively broken the mortgage.
07 Run the math before you go firm
When rates have fallen, porting may not win — breaking and restarting at a lower rate can be cheaper even after the penalty. Neither path is “always right”; only “which number is smaller this time.” Before you go firm on an offer, have a mortgage professional run both the port and break scenarios — that math is free.
Bridge or port — the numbers decide. Send me your situation and I’ll run it with a mortgage professional: Icedas Feng | 403-464-0856 | icedasfeng2@gmail.com