Buying before you sell is stressful without a bridging loan. Here's how bridging finance covers the purchase of your new home while you sell the old one.
- Bridging loans cover the gap between buying your new home and settling on your old one.
- You typically make interest-only repayments (or none) during the bridging period.
- The bridging period is typically 6-12 months, with some lenders offering up to 24 months.
- A broker calculates peak debt accurately to ensure you qualify — and that the end debt is manageable.
The ideal property transaction: sell your home, bank the proceeds, then buy your new one. In reality, the timing rarely works out that neatly. A bridging loan solves this problem — financing the purchase of your new property while you wait for your current home to settle.
How Bridging Finance Works
A bridging loan is a short-term facility that covers the period between buying Property B and receiving the proceeds from selling Property A. You own both properties simultaneously during the bridging period. When Property A settles, the sale proceeds pay down the bridging loan, and the remaining balance becomes your ongoing home loan on Property B (the "end debt").
Closed vs Open Bridging Loans
Closed bridging: you have a signed contract on your existing property with a known settlement date. Lower risk for the lender — better rates and easier approval.
Open bridging: your existing property hasn't been listed or sold yet. Stricter criteria, higher rates, shorter maximum terms.
Peak Debt: The Key Number
Peak debt = new property purchase price + purchase costs + existing mortgage balance.
Example: New property $950,000 + costs $40,000 + existing mortgage $300,000 = peak debt $1,290,000.
Most lenders will finance peak debt up to 80% of the combined property values.
Repayments During the Bridging Period
During the bridging period, interest accrues on the full bridging loan. Options:
- Capitalised interest: accrues and is added to the balance — reduces cash flow pressure but increases total debt
- Interest-only repayments: you pay interest monthly — prevents balance growing
Once your old property settles, you switch to normal P&I repayments on the end debt.
Bridging Loan Term and Costs
Typical terms: 6-12 months standard, up to 24 months with some specialist lenders. Bridging loans are more expensive than standard home loans — typically 0.5-1.5% higher on rate, plus establishment fees ($500-$1,500) and discharge fees ($150-$500) when the old property settles.
Alternative: Simultaneous Settlement
Sometimes the simplest solution is negotiating simultaneous settlement — selling your old home and buying your new one on the same day. Worth exploring with both solicitors before committing to bridging.
Is Bridging Finance Right for You?
Bridging loans suit borrowers who have found their ideal new home and can't wait, are confident their existing property will sell within the bridging period, have sufficient equity to keep peak debt within lender limits, and can demonstrate the ability to service the end debt.
Our specialist bridging loan brokers work with lenders who understand property chains and time-sensitive settlements. Contact Sam to run the numbers on your specific situation.
Frequently Asked Questions
Can I get a bridging loan if I haven't listed my existing property yet?
Yes — this is called an open bridging loan. Criteria are stricter and rates slightly higher, but it's available through specialist lenders. The lender will require confidence that the property will sell within the loan term.
What happens if my existing property doesn't sell in time?
Most lenders will work with you on an extension if the property hasn't sold. This comes with additional costs. Having a realistic sale estimate and considering a slightly longer bridging term from the start reduces this risk.
