Short-Term Mortgage Financing & Bridge Loans

Are you currently struggling to get the financial help you require? Do you need to pay down debt or cover an unexpected large expense? Have you been rejected by your bank and other big financial institutions because of poor credit or other reasons?

If you answered yes to any of the above questions, a private mortgage lender might be able to help you resolve your financial issues. The great thing about working with a private mortgage lender is that they can offer you a customized short term financing solution or a bridge loan. These products will not only help you deal with any impending issues but could also have a strong positive impact on your financial situation.

What is a Bridge Loan?

While you may not have heard of a bridge loan before, it is, in fact, a common and very useful financial tool for many credit-constrained Canadians. It is a short term financial solution provided by private lenders, to those looking to utilize the borrowing potential of their homes to help cover an expense. For clients who cannot obtain similar financing from banks, this type of product has the added benefit of improving their overall creditworthiness as well. More often than not a bridge loan is the preferred choice of people who have been rejected by their banks. 

How does it Work?

A bridge loan is financed by a private lender and is similar to a typical mortgage loan. The difference is, a bridge loan is a temporary financial tool that is meant to be used as a short term solution to improve your credit and help you gain access to lower interest rate loans in the future. Everyone’s financial circumstances are unique but if you’re considering taking out a bridge loan to help improve your finances, you can expect your experience to be similar to this:

Step 1: Rejection from a bank

Bridge loans are great for those who have been rejected by a bank because of bad credit or other financial reasons.

Step 2: Work with a Private Lender

Because you’ve been rejected by a bank you’ll now need to switch gears and work with a private lender. Private lenders are less risk-averse than banks, and thus more willing to work with credit-constrained individuals. This means they can offer you a short term mortgage loan that you can use to cover your urgent financial needs. These mortgage loans typically last from 6 months to a year or two, during which time you’ll make all your payments on time to rebuild your credit. This will allow you to build your creditworthiness to later obtain financing from a B-lender, A-lender or bank and reduce your cost of borrowing.

Step 3: Get a Mortgage from a B-Lender

Now that you’ve worked to improve your credit with a mortgage loan from a private lender you can refinance that mortgage with a B-lender. Usually, you’ll be eligible for a significantly lower interest rate this way, so you’ll get to save on financing costs. The goal here is the same; pay off your mortgage loan on time every month, improve your credit and gain access to a mortgage loan from a traditional bank or A-lender.

Step 4: Finally, Get a Mortgage from a Bank

The final stage of a bridge loan is to refinance the mortgage you have with a B-lender or private lender, with a bank or A-Lender instead. By this point, you should have improved your credit enough to be eligible to do so at an even lower interest rate. 

Bridge LoanCheck out our infographic for a visual look at how a bridge loan works. 

A-Lenders, B-Lenders, and Private Lenders

If we think of the lending world as a ladder there are 3 rungs. Each rung represents a different type of lender. At the top are the A-lenders or banks, the middle rung is the B-lenders, and the bottom rung is the private lenders.

A-Lenders/ Banks

Banks or other more traditional large financial institutions have the most strict approval requirements that potential borrowers must meet. For individuals with little or bad credit history, this presents a big challenge. This is where a bridge loan from a private mortgage lender becomes an extremely useful tool. Individuals with restricted credit can obtain a bridge loan either from a B-lender or a private lender in order to work their way up the ladder and eventually save on interest costs.


B-lenders are the stop in between banks and private lenders. Their rates are typically higher than banks but still lower than private lenders. Much like private lenders, their goal is to help out those who have been rejected by banks and other A-lenders. 


These are lenders who tend to look at the full story, not just a credit score or other typical financial indicators when approving borrowers. Private lenders like to work with their borrowers in order to help create short term solutions to help them achieve their financial goals.

Do you know what the minimum credit score required for mortgage approval is?

When Can a Bridge Loan Work for you?

Mortgages from private lenders, in the form of bridge loans and short term mortgage financing, are commonly used tools for a variety of different circumstances. These can include (but are not limited to):

  1. Loan Rejections. If you continue to be rejected by your bank because of credit issues, a bridge loan will help you work to correct those issues while still getting the money you need.
  2. Late Payments, 60 Day Notice, and Notice of Default. A bridge loan can help you clear your debts and work towards a brighter financial future.
  3. Unpaid Income Tax Bills. If you’ve received a tax bill from Canada Revenue Agency (CRA) or Revenu Québec and don’t have the money to cover it, get in contact with us as soon as possible.
  4. Business Owners. Are you a business owner that’s having trouble getting the financing you need? You can obtain alternative forms of financing by leveraging your property, often at rates lower than typical business loans.
  5. Debt Consolidation. A bridge loan is a great way to consolidate any high-interest credit card debt or personal debt you might have – while building a stronger credit history.
  6. Consumer Proposals. If you’re currently in the process or have already filed for a consumer proposal, a private mortgage lender can work with your trustee to shorten your payment period.
  7. Mortgages. If you currently have a lien on your home because of specific debt issues consider discussing a customized mortgage solution with a private lender.

Want More Information?

If you think a bridge loan, short term mortgage financing, or a mortgage from a private lender might be a good solution for your current situation, then submit a request and we’ll connect you with a third-party licensed mortgage specialist today. 

Note: Loans Canada does not arrange, underwrite or broker mortgages. We are a simple referral service.

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