Ottawa buyers can't bridge a house that hasn't sold

The plan that isn't a plan

The fall market restarts and the move-up calls start. Family in a townhouse in Barrhaven or Findlay Creek, second kid on the way, they want a detached with a real yard and a garage that fits an actual car. Somewhere in the first ten minutes, one of them says it: we'll just buy first and bridge it.

I get why. Bridge financing sounds like a safety net, and a safety net is what you want when the timing looks scary. It isn't one. A bridge loan is a plumbing fix for a gap of days or weeks between two closings that are both already certain. Most institutional lenders in Ontario will not advance one until you have a firm, unconditional agreement of purchase and sale on the home you are leaving. A conditional offer does not qualify. Listed and getting showings does not qualify.

So the tool you are planning around only becomes available after the risk you were worried about has already been eliminated. That is the whole problem in one sentence, and almost nobody hears it until they are three weeks from an unconditional purchase closing with an unsold house behind them.

The cost of a bridge is not the issue

Let me get the money out of the way, because people worry about the wrong end of this.

Prime sits at 4.45% and has since the Bank of Canada parked the overnight rate at 2.25%, now six consecutive holds with another announcement tomorrow. A bank bridge is generally priced at prime plus 2% to 3%, so call it 6.45% to 7.45%, charged daily on the amount outstanding. Add an administration fee that is usually somewhere between $200 and $500.

Run it on a real Ottawa move-up. July's benchmark townhouse was $542,500 and the benchmark single-family was $725,000. You are putting 20% down on the detached, so $145,000, and you already paid a $25,000 deposit with the offer. The bridge is $120,000. Held for 30 days at 7.45%, that is $735 of interest. Stretch it to 45 days and it is $1,102.

Under twelve hundred dollars to make two closings line up. That is not the expensive part of this transaction. The expensive part is what you do instead when you cannot get one.

The realistic alternative to a bridge, when your own house has not gone firm and your purchase closing is coming, is cutting your asking price until somebody signs. Three percent off that benchmark townhouse is $16,275. Five percent is $27,125. You are trading a $735 problem for a $16,000 one, and the trade happens because of sequencing, not because of rates.

Twenty-eight days is the number that gets people hurt

Here is where the planning goes wrong. July's median days on market in Ottawa was 28, up from 22 in June. People hear 28, build in a comfortable 45-day gap, and figure they have bought themselves a margin.

Two things are wrong with that. It is a median, so half the homes that sold took longer than 28 days, and by definition your house has a coin flip's chance of being in that half. And it only counts homes that sold. Every listing that gave up and came off the market is invisible in that number, which is the same survivorship problem I wrote about when Ottawa listings were quitting almost as fast as they were selling.

The honest number is inventory. Ottawa finished July with 3.5 months of supply, up from 3.2 a year earlier, which is roughly 106 days of listings at the current pace of absorption. There were 1,325 sales against 2,530 new listings, a sales-to-new-listings ratio of about 52%. Roughly half of what came on last month did not clear. That is a balanced market by the textbook, and it is also more supply than Ottawa normally carries. Neither of those facts supports a 45-day assumption on your own sale.

The three structures that actually work

Sell firm, then buy. Least glamorous, cheapest, and the one I recommend most often right now. You go unconditional on your sale, then you shop with a closing date behind it and a bridge available if the dates do not match. The old objection was that selling first turns you into a desperate buyer. In 2021 that was true and it was fatal. With 3.5 months of inventory and detached benchmark pricing up all of 0.7% year over year, a buyer on a clock is in far less danger than a seller on one.

Buy with a sale-of-property condition. This one came back from the dead. A condition on the sale of your existing home, with the usual escape clause letting the seller keep marketing and bump you on short notice, was unusable in Ottawa for about four years. It is negotiable again, especially on a listing that has already sat. It costs you leverage on price, and you should expect to pay for the privilege, but it is a real option that did not exist in this market a few years ago.

Buy unconditional and fund the gap yourself. A home equity line of credit arranged well in advance is the clean version of this. Arranging one takes weeks and an appraisal, so it has to be done before you are under pressure, not during. Only do this if you can genuinely carry both properties, because if your sale falls apart you are holding two mortgages and a line of credit at once. If you want to see how that goes when a buyer walks, read what happens to the deposit and the mutual release.

The lender detail nobody mentions until it's too late

Many banks only offer bridge financing to clients who hold both mortgages with them. If you are shopping a better rate at a new lender, or porting your existing rate to the new house, the bridge may quietly not be on the table at all.

Ask before you sign anything with a closing date on it. Confirm bridge availability with your lender, then set your purchase closing date, then negotiate. Doing it backwards is how people end up paying private lender rates on two weeks' notice.

And when the sale does go firm, run the firm-to-close checklist rather than assuming the hard part is over. The bridge only works if both closings actually happen on the days everyone agreed to.

What I'd tell you over coffee

Decide your sequence before you fall in love with a listing, because after that you will rationalize whatever sequence the listing requires. Go look at current inventory first, with no offer and no obligation, then work backwards to the financing.

If you want to map your actual numbers, what your place would go firm at, what the gap looks like, and whether your lender will bridge you at all, call or text me at 613-262-6545 or email fil@613realtor.ca. Fifteen minutes on this beats any calculator you will find online.