Selling Friday, buying Friday: when does the money actually arrive?

Putting both closings on Friday can look wonderfully tidy. One moving day. No deliberate overlap between homes. The money from the sale pays for the purchase.

But a date doesn't establish the order in which the money will be available. Your purchase can depend on proceeds from a sale that hasn't finished yet. If that sale runs late, the equity you have on paper can't pay the amount your purchase lawyer needs.

Kormans LLP describes this problem in its explanation of bridge financing around closing day. Even closings scheduled near each other or on the same day can create a funding problem. That's the part to work through before booking the movers.

Follow the money through an example

Suppose you're selling for $900,000. For this illustration, assume the mortgage payout is $500,000 and the total selling costs and adjustments are $40,000. Those are invented planning figures, not typical Toronto costs or a quote.

The sale would leave $360,000:

Now suppose your purchase lawyer's calculation says you must provide $300,000 for the new home, after accounting for the purchase deposit already paid and the new mortgage advance. You have $40,000 available independently of the sale. The remaining $260,000 is supposed to come from your sale proceeds.

The sale produces enough money. The timing is the difficulty.

Rad Realty · Funding a same-day closing

Waiting on the sale

Two closings on one day can still leave the purchase waiting for money from the sale. Follow where the sale price goes, and which part of the purchase cannot be paid until it arrives.

Hypothetical example. Amounts are invented planning figures, not typical Toronto costs, a quote or a financing commitment. No universal closing timetable or clock time is implied.

Invented figures · one $0–$900,000 scale · no clock times

Read the visual description

Invented example on one zero-based $0 to $900,000 scale. Top bar: the $900,000 sale price divides into a $500,000 mortgage payout, $40,000 assumed costs and adjustments, and $360,000 expected net proceeds, hatched because they are not released until the sale completes. A band carries $260,000 of those proceeds through a release point into the purchase. Bottom bar: the purchase needs $300,000 after the deposit and new mortgage advance; $40,000 is independently available and $260,000 depends on the sale. $100,000 of the expected proceeds would remain, before any bridge costs. A dotted alternative shows an approved bridge advance only as a question. No clock times are shown.

Until the sale completes and the required payouts and costs are accounted for, you can't treat the expected $360,000 as available purchase funds. Your lawyer needs to establish how and when the $260,000 can reach the purchase transaction. Having both files with the same firm may help coordination, but it doesn't cause an unfinished sale to produce money.

What changes when the sale is delayed

There is no reliable universal timetable in which one house closes at a certain hour and the next closes an hour later. Work backwards from the funding requirements and deadlines your lawyer and lender give you.

In the example, the vulnerable point is clear: the purchase needs $260,000 from another transaction. If that transaction cannot supply it in time, you need an approved alternative source or a legal solution to the closing delay. Kormans notes that requesting an extension can involve extra costs, and a failure to close can have more serious consequences. An extension is something to negotiate, not an extra day you can simply take.

A useful financing conversation starts with the amount and the dependency: “We need $260,000 from our sale to complete the purchase. What happens if the sale doesn't close when expected?”

That is a better question than “Are we approved for the new mortgage?” You can be discussing two different funding needs.

Where a bridge loan fits

A bridge loan can make funds available against the equity in the home you're selling before its sale proceeds arrive. When that sale closes, the proceeds repay the bridge loan and its associated costs, along with the other required payouts.

If a lender approved a $260,000 bridge advance for our example, it would fill the illustrated gap. Once the $360,000 of net sale proceeds became available, repaying that principal would leave $100,000 before bridge interest, fees or any changes to the assumed closing figures.

Approval is essential to the example. A calculation showing sufficient equity is not a lender's commitment to advance it.

TD's published bridge-financing description requires copies of the sale and purchase agreements and approval for a TD mortgage or Home Equity FlexLine on the new property. Those are TD's stated requirements; another lender's product and conditions may differ. Get the terms for the financing you would actually use, including the amount, advance date, repayment deadline, interest and fees.

Ask about the uncomfortable scenario as well: what if the sale is delayed beyond the agreed loan term, or doesn't complete? A short-term facility needs a repayment plan. Don't assume it will automatically extend because the sale was meant to fund it.

Choosing the order of the closings

Buying first with approved bridge financing can give you time to move before handing over the old home. You pay for the borrowing and the period of overlap, but you reduce your reliance on two transactions finishing in the right order on one day. The availability of that option needs confirming before you commit to those dates.

Selling first gives you a chance to establish your available proceeds before the purchase. It may also mean temporary accommodation, storage and another move. Those costs belong in the comparison too.

Same-day closings may still suit your circumstances. The decision should follow a conversation between you, your lawyer and your lender about the actual funding sequence and the alternatives if it slips. A tightly packed moving schedule isn't worth much if the purchase funds have nowhere else to come from.

Before settling on Friday, put the amount beside the dependency: “This purchase needs $260,000 from that sale.” Then have everyone responsible for the closing explain how that money gets there.