Bridging loan

A bridging loan is short-term finance that lets you buy a new property before selling your existing one. It covers the gap (the "bridge") between purchasing your new home and receiving the proceeds from the sale of your current home. The bridging loan is secured against both properties during the bridging period. Once your existing property sells, the proceeds reduce the loan and the remaining balance (your end debt) becomes a standard mortgage.

A bridging loan provides the funds to settle on your new property while your existing property remains unsold. The lender uses both properties as security and assesses your ability to repay the end debt after the sale. This allows you to buy before you sell, avoid temporary accommodation, and make an unconditional offer on your next home. Most homeowners who use a bridging loan move directly into their new home and then list their existing property for sale at the best possible price.

Peak debt is the maximum amount you owe while you hold both properties. It includes your existing mortgage balance, the new property purchase price, stamp duty, legal fees, and any capitalised interest during the bridging period. Lenders typically cap your peak debt at 80% of the combined value of both properties. Understanding your peak debt is essential because it determines whether you qualify for a bridging loan and how much the bridging period costs.

End debt is the amount remaining after your existing property sells and the proceeds are applied to your bridging loan. It becomes your ongoing mortgage with regular repayments. For example, if your peak debt is $1,200,000 and your property sells for $750,000, your end debt is $450,000. Lenders assess whether you can comfortably service the end debt based on your income before approving the bridging loan.

Capitalised interest means the interest charges during the bridging period are added to your loan balance rather than requiring monthly repayments. This means you do not need to make separate interest payments while owning both properties. However, capitalised interest increases your peak debt over time. The longer the bridging period, the more interest accrues. Selling your existing property sooner reduces the total capitalised interest cost.

Most lenders allow a bridging period of 6 to 12 months to sell your existing property. Six months is the standard, with some lenders offering up to 12 months. Extensions are rare and may involve additional conditions or fees. Our mortgage broker team helps you assess a realistic timeline for selling and matches you with a lender whose bridging period suits your situation.

If your property does not sell within the bridging period, options include requesting an extension from the lender (may involve conditions), reducing the asking price to accelerate the sale, refinancing the bridging loan to a different product, or renting out the property temporarily. This is why a strong exit strategy is essential before committing to a bridging loan. Our mortgage broker team builds contingency plans into every bridging strategy.

A closed bridging loan means you have already exchanged contracts on your existing property with a confirmed settlement date. A closed bridging loan is lower risk and may attract a better rate. An open bridging loan means your property has not yet sold. An open bridging loan carries more risk for the lender and may have slightly higher rates or stricter conditions. Our mortgage broker team advises on which type applies to your situation.

Bridging loan costs typically include: capitalised interest during the bridging period (the largest component), establishment fee ($0 to $1,000), property valuation ($300 to $600 per property, sometimes waived), and discharge fee on your existing loan ($150 to $500). On a $200,000 bridging amount at 7% for 6 months, capitalised interest is approximately $7,000. Total bridging loan costs typically range from $6,000 to $15,000 depending on the amount and duration.

For most homeowners, the $6,000 to $15,000 cost of a bridging loan is easily justified by: securing the right property without missing out, selling your existing home at the best price without pressure, avoiding temporary accommodation and double moving costs, and making an unconditional offer that gives you a competitive advantage. Compare the bridging loan cost to the potential loss of selling your property $20,000 to $50,000 below market due to time pressure.

Selling first gives you budget certainty but requires temporary accommodation and puts you under pressure to find a new home quickly. Buying first with a bridging loan lets you secure the right property, move directly, and sell without pressure. A third option is a simultaneous settlement where both transactions align. Our mortgage broker team at buying your next home compares all three approaches for your situation.

Yes. A deposit bond substitutes for the cash deposit when you exchange contracts on your new property. It is useful when your equity is tied up in your existing home and has not yet been released. A deposit bond typically costs 1% to 1.5% of the deposit amount. Our mortgage broker team arranges deposit bonds alongside bridging loans to give you maximum flexibility when buying before you sell.

Most lenders require your peak debt (total borrowing across both properties) to be 80% or less of the combined value of both properties. This means you generally need at least 20% equity across both properties. The more equity you have, the lower your LVR and the better your bridging loan rate. Use our home equity calculator to estimate your available equity.

Most bridging loans offer capitalised interest during the bridging period, meaning no monthly repayments are required. Some lenders give you the choice of interest only repayments instead, which reduces the total capitalised interest but requires ongoing cash flow. Once your existing property sells and the bridging loan converts to your end debt, you begin regular principal and interest (or interest only) repayments on your ongoing mortgage.

Bridging loan rates are typically 0.5% to 2% higher than standard variable rates because of the short-term nature and higher risk. However, rates vary significantly between lenders. Some lenders offer competitive bridging rates, especially for closed bridging loans. Since the bridging period is short (6 to 12 months), the total interest cost is manageable. Our mortgage broker team compares rates across 35+ lenders to minimise your bridging loan costs.

Yes. Pre-approval for a bridging loan means the lender has assessed your financial position and agreed in principle to provide bridging finance up to a certain amount. This allows you to make an unconditional offer when the right property appears. Pre-approval is typically valid for 3 to 6 months. Our mortgage broker team arranges bridging loan pre-approval so you are ready to act quickly in a competitive market.

A simultaneous settlement means the sale of your existing property and the purchase of your new property settle on the same day. This avoids the need for a bridging loan entirely. However, simultaneous settlement is complex to coordinate and requires both transactions to align perfectly. If one side is delayed, the other is affected. Our mortgage broker team can help arrange simultaneous settlement when the timing works, or recommend a bridging loan as a safer alternative.

Yes, avoiding temporary accommodation is one of the main benefits of a bridging loan. Without a bridging loan, selling first means you need to find rental accommodation, pay rent, store furniture, and potentially move twice. A bridging loan lets you move directly from your current home to your new home in a single move, saving time, money, and stress. The cost of temporary accommodation and double moving often exceeds the cost of a bridging loan.

Yes. Self-employed borrowers can access bridging loans, though the documentation requirements are stricter. Lenders need to verify you can service the end debt, which typically requires 2 years of tax returns and financial statements. Our mortgage broker team knows which lenders are most flexible for self-employed bridging loan applicants and presents your income in the best possible light.

Yes. A bridging loan can be used to purchase an investment property while you sell an existing property. The same peak debt and end debt principles apply. If you are keeping your existing property as an investment and buying a new home to live in, a bridging loan lets you secure the new home before selling. Our mortgage broker team structures the loans to maximise tax deductions on the investment portion.

A bridging loan is short-term finance specifically for buying a new property before selling your current one. Refinancing is replacing your existing loan with a new one for a better rate or features. They serve different purposes. A bridging loan is temporary (6 to 12 months), while refinancing is long-term. If you need to access equity without selling, refinancing or an equity release may be more appropriate than a bridging loan.

Lenders want to see a clear, realistic plan for selling your existing property within the bridging period. This typically includes: a property appraisal from a local agent showing estimated sale price and timeframe, evidence the property is market-ready or plans to prepare it, comparable recent sales in your area, and confirmation you are not in a declining market. A strong exit strategy significantly improves your bridging loan approval chances.

Bridging loans can be approved in 3 to 10 business days for straightforward applications. Complex situations (self-employed income, unusual properties, high LVR) may take up to 21 days. Pre-approval can be arranged in advance so you are ready to move quickly. Our mortgage broker team prepares your application thoroughly to minimise delays and ensure fast approval when time is critical.

Yes. Not all lenders offer bridging loans, and terms vary significantly. A mortgage broker compares options across 35+ lenders, structures your bridging loan to minimise costs, calculates your peak debt and end debt, builds your exit strategy, arranges deposit bonds if needed, and coordinates the entire process. The service costs $0. Banks can only offer their own bridging product (if they have one). A mortgage broker gives you access to the full market.