Bridging finance in 2026: when it makes sense and what it costs

Published 7 August 2026 · Updated 7 August 2026 · 6 min read · By Shane Heness, mortgage broker

Bridging finance has a bad reputation earned by an older version of the product, where you serviced two mortgages at once and hoped the sale came quickly. That is not what the current market looks like.

What changed

The structural change is interest capitalisation. On a modern bridging facility, the lender calculates the interest that will accrue over the bridging term and builds it into the facility. You make no repayments. When the outgoing property sells, the sale proceeds clear the bridging debt including the accumulated interest, and whatever is left over reduces your ongoing loan.

That single change moves bridging from a cash flow problem into a pricing question, and it makes the product usable by people who could never have serviced two loans, most obviously retirees.

Five situations where bridging is the right answer

1. The downsizer moving to a retirement village or smaller home

An older couple has a house worth $1.4 million with no mortgage, and wants to move into something worth $900,000. Selling first means moving twice and living somewhere temporary. Bridging lets them buy the new place, move once, then sell properly rather than under time pressure. With no repayments during the term, their fixed retirement income is not the constraint it would have been.

2. Separation, where one party needs to stay put

Separating couples are often told to sell immediately. Where children are involved and stability matters, bridging can hold the existing home while the settlement works through, or fund one party into a new home before the joint property is sold. Because no repayments fall due during the term, neither party's credit file takes damage from a missed payment during a difficult period.

3. Off the plan settlement shortfall

The most common distress case we see. A buyer put down a deposit on an off the plan apartment two or three years ago, the building is now finished, and their borrowing capacity no longer reaches the purchase price at current assessment rates. Bridging can complete the acquisition, after which the property is sold or refinanced once it is a completed dwelling with a real valuation.

4. Buying at auction before the sale campaign is finished

Auctions are unconditional. If the right property comes up before your own sale campaign has run, bridging is the only structure that lets you bid with certainty.

5. The financial planner referral: preserving super

An older client is advised to draw down a large super balance to fund a property purchase, crystallising a tax outcome and permanently reducing their retirement balance. A bridging loan repaid from the eventual sale of the existing home achieves the same purchase without touching super. This is one we see through planner referrals and it is frequently a better outcome than the obvious one.

What it actually costs

Indicative ranges at September 2026 across the LoanBuddy panel. Not a quote. Rates and fees vary by lender, term and security.

Set that against the alternatives. Selling first and renting for six months in Western Sydney costs $17,000 to $22,000 in rent plus two lots of moving costs, and leaves you buying back into a market you have just sold into. Missing the property entirely has no invoice attached but is often the largest cost of the three.

The risk to be honest about

The outgoing property has to sell, at or near the price the bridge was sized against. If it does not, you are extending a facility at a rate above a standard loan, and the interest keeps capitalising. Lenders take different positions on extensions, and some will require a sale by auction if the term runs out.

Before recommending bridging we work through the sale price conservatively, not optimistically, and we stress test what happens if the property takes nine months rather than four. If that scenario does not work, bridging is the wrong tool and we will say so.

What we need to assess it

• A realistic appraisal on the outgoing property, ideally from two agents.
• The current loan balance and lender on that property.
• The purchase price or expected price of the incoming property.
• Your income position after the sale, because that is what the end debt is assessed against.
• Your timeframe and any fixed dates, such as an off the plan settlement date.

How the facility is sized

Bridging is priced and approved off two numbers: peak debt and end debt. Understanding both is what lets you judge whether a bridge is sensible or a stretch.

• Peak debt is the total borrowing at its highest point. It is the existing loan on the outgoing property, plus the purchase price and costs of the incoming property, plus the capitalised interest for the bridging term.
• End debt is what remains after the outgoing property sells and the net proceeds are applied. This is the loan you are left servicing, and it is the figure the lender assesses your income against.

Illustrative only. Not a quote. Your own figures, rates and costs will differ.

That example shows why bridging suits downsizers so well. Peak debt is high, but end debt is nil, so the servicing test the lender applies is trivial. Compare that to a buyer moving up rather than down, where end debt is substantial and the servicing test becomes the binding constraint rather than the security position.

The number to watch is peak debt against the combined value of both properties. Most lenders want that ratio at or below 80%. If your peak debt sits close to that ceiling, a soft sale price on the outgoing property does not just cost you money, it can push the facility outside policy. Sizing the bridge against a conservative sale estimate rather than the agent's optimistic one is the whole discipline of the product.

Bridging is a niche we have deliberately built out, because it solves problems that nothing else solves and most brokers do not want the complexity. Our bridging finance page covers the structures, or book a free call and we will run the numbers on your actual situation.

Frequently asked questions

Written by Shane Heness

Owner and mortgage broker at LoanBuddy, Parramatta NSW. Eight years as a mortgage broker and a property investor since 2015. Credit Representative #528658 under Australian Credit Licence #389328.