This article contains general information only and does not constitute personal financial advice. Please consider your own circumstances or speak with a qualified mortgage broker before making any decisions.
Found the next property you want to buy, but haven’t sold your current home yet? It is one of the most common timing problems homeowners face. Do you sell first and risk missing out on the right property, or buy first and carry both properties for a while?
Bridging finance exists to help solve this problem. It is not automatically the better choice just because it is more convenient, but it can genuinely change what is possible if you understand how it works, what it costs and where the risks sit.
What is bridging finance?
Bridging finance lets you buy your next home before you have sold your current one, without needing to arrange a simultaneous settlement or move into temporary accommodation in between. Home-to-home bridging loans generally have a set term, often up to 12 months, although this varies between lenders and products. This gives you the flexibility to buy when the right property comes up rather than waiting until your current home is sold.
How is a bridging loan different from a standard home loan?
A standard home loan is an ongoing mortgage. A bridging loan is a short-term facility that is usually secured against your existing property and the one you are buying until the existing property is sold.
Bridging finance commonly involves two important figures that do not usually arise with a standard home loan: peak debt and end debt. Understanding the difference is the key to understanding how bridging finance works.
What is peak debt and how is it calculated?
Peak debt is the highest amount you owe during the bridging period, after you have settled on the new property but before the proceeds from your existing property have been applied. It generally includes your existing mortgage balance, the new property’s purchase price, purchase costs, lender fees and any interest capitalised during the bridging period.
End debt is the amount left after your existing home is sold and the net sale proceeds are applied to the peak debt. This is the ongoing home loan you retain after the bridge ends. Many lenders use the end debt when assessing whether you can afford the ongoing loan, although assessment methods and requirements vary.
Here is a simplified example showing how the figures relate:
| Amount | |
| Current home value | $1,400,000 |
| Existing mortgage | $450,000 |
| New property purchase price | $1,800,000 |
| Approximate buying costs, including stamp duty and legal fees | $75,000 |
| Indicative peak debt before bridging interest and lender fees | $2,325,000 |
| Expected sale proceeds after selling costs, but before repaying the existing mortgage | $1,340,000 |
| Indicative end debt before bridging interest and lender fees | $985,000 |
These figures are illustrative only. The example excludes bridging interest and lender fees, which would increase the actual peak debt and end debt. Your figures will depend on the properties, sale timing, lender policy, fees and interest rate.
Do you have to make repayments on both properties at the same time?
It depends on the lender and loan structure. Some lenders require interest-only repayments during the bridging period. Others allow interest to be capitalised, which means it is added to the loan balance rather than paid monthly.
Westpac, for example, currently allows interest to be capitalised and does not require repayments on its bridging loan during the bridging period. Its published product terms also state that the interest rate increases by one percentage point after the first three months. Lender policies and pricing can change, so the current terms should always be checked before applying.
It is also worth being upfront about the cost. Bridging loans can be priced higher than discounted standard home loans, and non-bank or private lending options can carry additional fees and higher rates. The trade-off is the flexibility they provide.
How long do lenders usually allow you to sell your existing property?
Many home-to-home bridging loans allow up to 12 months. Other lenders and non-bank products may offer shorter or longer terms, so the permitted timeframe needs to be confirmed for the particular product.
What happens if your current home does not sell in time?
If your home has not sold by the end of the agreed term, you should contact the lender as early as possible. Depending on the lender and your circumstances, the next step may involve seeking an extension, contributing other funds, changing the loan structure or arranging the sale of the property. Any extension is likely to require approval and may involve a higher rate or additional fees.
If the debt remains unpaid, the lender may ultimately enforce its security, which can include taking possession of and selling the property. This is not an automatic outcome on the day the term expires, but it is a serious risk that should be understood before entering the loan.
This is the core risk of bridging finance. The strategy depends on a sale occurring within the available timeframe and at a price that leaves the expected end debt. A realistic sale price and a property that is genuinely ready to list help keep that risk manageable.
Is bridging finance harder to qualify for when interest rates are higher?
It can be. Higher interest rates can increase both the cost of the bridge and the assessed repayment on any end debt. Some lenders, including Westpac where its end-debt assessment applies, focus on whether the borrower can service the ongoing debt after the existing property is sold. Other lenders may assess the application differently or require the borrower to demonstrate that they can manage interest or repayments during the bridging period.
Equity is also important. Lenders generally cap the peak debt at a percentage of the combined value of the properties and may also allow for capitalised interest, fees and a sale-price buffer. The maximum loan-to-value ratio varies between lenders and products.
How much do lender policies differ when it comes to bridging?
Considerably. Mainstream lenders can offer competitive pricing, but their income verification, serviceability and property requirements may be more restrictive. Non-bank lenders may place greater weight on the property, equity position and exit strategy.
Assetline Capital, for example, states that qualifying borrowers with no end debt may not require traditional income servicing. Its current bridging products can allow capitalised interest and terms of up to 12 months, subject to eligibility and credit assessment. This can create options for borrowers who do not fit a standard bank’s criteria, but rates, fees, loan terms and maximum loan-to-value ratios still need to be compared carefully. The peak debt LVR must not go over 70% to qualify for this product.
What alternatives should you consider before choosing bridging finance?
Bridging is not the only way to manage the timing problem. One alternative is a simultaneous settlement, where the sale and purchase settle on the same day.
“We often work through the options with clients and say, look, we can do a bridging loan, but it can be expensive. It comes down to convenience. If someone believes they can sell their property and arrange for the purchase to settle on the same day, lenders can coordinate a simultaneous settlement. That works for some people, but it can be stressful. You need a buyer who is comfortable settling on your timeline, and that also has to line up with the seller of the property you are buying.” – Kane Ladhams, Senior Mortgage Broker
Another alternative is selling first, banking the proceeds, and renting or placing your belongings in storage while you look for your next property without the same financial pressure.
When would selling first be the better option?
“If the client is really concerned about the interest cost and they are happy to sell, move their belongings and rent for six months or so while they look for another property, I would tell them that selling first is probably the better option. That is the benefit of understanding bridging finance. It gives you another option, but it will not be the right option for everyone.” – Kane Ladhams, Senior Mortgage Broker
As a general guide:
Bridging may suit you if:
- You have strong equity in your existing property
- Your income comfortably supports the lender’s requirements and any expected end debt
- You are reasonably confident your existing home will sell within the bridging period
- You want to avoid selling under pressure before finding the right next property
Selling first may make more sense if:
- The bridging interest, repayments or overlapping property costs would be uncomfortable
- Your current property could realistically take longer to sell
- Your purchase budget depends heavily on achieving a specific sale price
- You would be uncomfortable carrying the additional debt and risk, even temporarily
What mistakes do people make when trying to buy before they sell?
“People sometimes think they can buy a property, negotiate a long settlement and then rush to sell their current home. You may end up accepting less than you otherwise could because you need a buyer who can meet your timeframe. Once buyers understand that you are under pressure, they may have more bargaining power.” – Kane Ladhams, Senior Mortgage Broker
The lesson is about protecting your negotiating position. The more rushed your sale appears to a buyer, the more leverage they may have.
A recent example of bridging finance working well
FABE recently worked with a client whose business had gone into administration and who was also navigating a separation, with an ex-partner remaining on the loan contract. He had purchased an off-the-plan property several years earlier and the development had just been completed. Because he had recently started a new business, he did not have tax returns available and his credit history did not fit standard bank policy.
FABE found a solution through the Assetline Capital Clinch bridging facility. Because the proposed exit was an immediate sale with no ongoing end debt, the lender was able to assess the strength of the security, equity position and exit strategy rather than relying solely on traditional income verification.
“The lender understood the situation. If he did not settle, he could have lost roughly $600,000 to $700,000 in potential profit. The facility had a 12-month term. If he could not repay it within that period, the lender could ultimately take enforcement action, including taking possession of and selling the property. He had the property on the market the week after settlement and sold it within about two months. Because the exit strategy was a prompt sale with no ongoing end debt, we were able to find a solution where most traditional banks would have said no. The interest rate was also competitive for the scenario.” – Kane Ladhams, Senior Mortgage Broker
It is a good illustration of what bridging finance can be designed for. With the right lender, a clear and workable exit strategy and a strong equity position may be considered differently from a conventional long-term home loan application.
What should you take away from this?
Bridging finance is not automatically better than selling first. It is a trade-off between flexibility now and carrying more debt, interest and risk for a limited period. It tends to work well when your equity position is strong and you are genuinely confident your existing home will sell within the loan term. It tends to work less well when either of those conditions is uncertain.
If you are weighing up buying before you sell, it is also worth understanding how the equity in your current home factors into the numbers. See our guide on “Using Equity to Buy Your Next Property” for more information.
Thinking about buying before you sell? We can model your peak debt, expected end debt and lender options before you make an offer.
This article contains general information only and does not take into account your objectives, financial situation or needs. Lending criteria, rates, fees and product terms apply and can change.