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Bridging Finance
Buy before you sell, with no repayments while you wait. The interest capitalises and is repaid from the sale.
Bridging finance
Bridging finance, as it actually works in 2026
Bridging finance lets you buy before you sell. Modern bridging products capitalise the interest, so you make no repayments during the bridging period and the accrued interest is repaid out of the sale proceeds of your existing property. Terms usually run six to twelve months. On a six month bridge over $700,000 of peak debt, the total cost commonly lands between $27,000 and $38,000 all in.
Bridging 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.
We have deliberately built bridging out as a niche, because it solves problems nothing else solves and most brokers do not want the complexity. If a bridge is the wrong tool for your situation, we will say so.
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Bridging Finance
What we can help you with
No Repayments During the Bridge
Interest capitalises and is repaid when your existing property sells. Your income is not the constraint.
Buy Before You Sell
Move on your timeline rather than the market. Secure the next property without rushing the sale of the current one.
Separation and Divorce
Hold the family home or fund one party into a new one while a settlement works through, without a missed payment on anyone credit file.
Downsizing
Move once rather than twice, and sell properly rather than under time pressure. The core market for capitalised bridging.
Off the Plan Settlement Shortfalls
Complete an acquisition where borrowing capacity no longer reaches the contract price, then sell or refinance as a completed dwelling.
End Loan Structured at the Same Time
We set up the long term loan alongside the bridge so the handover after settlement is clean.
What changed, and why it matters
The structural change is interest capitalisation. On a modern bridging facility, the lender calculates the interest that will accrue over the term and builds it into the facility. You make no repayments. When the outgoing property sells, the proceeds clear the bridging debt including accumulated interest, and whatever is left 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 on a fixed income.
| Traditional bridging | Capitalised bridging | |
|---|---|---|
| Repayments during the bridge | Full repayments on both loans | None. Interest accrues |
| Servicing assessment | Must service both loans | Assessed on the end debt after the sale |
| Suits retirees | Rarely | Yes, this is the core market |
| Typical term | 6 months | 6 to 12 months |
| Typical maximum LVR | Around 80% of combined value | Commonly up to 80%, product dependent |
The five situations where bridging is the right answer
1. The downsizer moving to a smaller home or a retirement village
An older couple has a house worth $1.4 million with little or no mortgage, and wants to move into something worth $900,000. Selling first means moving twice and living somewhere temporary. Bridging lets them buy, move once, then sell properly. With no repayments during the term, a fixed retirement income is not the constraint it would otherwise be.
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 sells. Because no repayments fall due during the term, neither credit file takes damage during a difficult period. A letter from the family lawyer is usually required.
3. Off the plan settlement shortfall
The most common distress case we see. A buyer exchanged on an off the plan apartment two or three years ago, the building is finished, and their borrowing capacity no longer reaches the purchase price at current assessment rates, or the valuation has come in below contract. Bridging can complete the acquisition up to around 80% of value, after which the property is sold or refinanced as a completed dwelling with a real valuation.
4. Buying at auction before your own sale campaign is finished
Auctions are unconditional. If the right property appears before your sale campaign has run, bridging is the only structure that lets you bid with certainty rather than hoping the vendor will accept a subject to sale clause.
5. Preserving superannuation, usually a planner referral
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. We see this through financial planner referrals and it is frequently a better outcome than the obvious one.
How the facility is sized: peak debt and end debt
Bridging is priced and approved off two numbers, and understanding both is what lets you judge whether a bridge is sensible or a stretch.
- Peak debt is total borrowing at its highest point: the existing loan on the outgoing property, plus the purchase price and costs of the incoming property, plus capitalised interest for the term.
- End debt is what remains after the outgoing property sells and net proceeds are applied. This is the loan you are left servicing, and the figure the lender assesses your income against.
| Component | Amount |
|---|---|
| Existing home value | $1,400,000 |
| Existing loan | $180,000 |
| New property purchase price | $900,000 |
| Stamp duty and costs | $37,000 |
| Capitalised interest, 6 months | $38,000 |
| Peak debt | $1,155,000 |
| Net sale proceeds after agent and legal costs | $1,355,000 |
| End debt | Nil, with $200,000 returned to the client |
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 is trivial. Compare it to a buyer moving up rather than down, where end debt is substantial and servicing becomes the binding constraint rather than the security position.
The ratio to watch is peak debt against the combined value of both properties. Most lenders want that at or below 80%. Where peak debt sits close to the ceiling, a soft sale price does not just cost money, it can push the facility outside policy. Sizing the bridge against a conservative sale estimate rather than the agent optimistic one is the whole discipline of the product.
What it costs, and what the alternatives cost
| Cost | Indicative amount | Notes |
|---|---|---|
| Capitalised interest | $24,000 to $31,000 | At roughly 7% to 9% p.a. over six months |
| Establishment fee | $1,500 to $3,500 | Varies by lender and facility size |
| Valuations, two properties | $800 to $1,800 | Both incoming and outgoing |
| Legal and settlement fees | $800 to $2,000 | Lender legal costs |
| Approximate total | $27,000 to $38,000 | For a six month term |
Indicative ranges at September 2026 across the LoanBuddy panel. Not a quote or an offer of credit. Rates and fees vary by lender, term and security.
Set that against the alternatives honestly. 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 require a sale by auction if the term runs out.
Before recommending bridging we work through the sale price conservatively and 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 say so.
The process
How a bridging loan runs
Bridging moves faster than standard lending because the situations that need it usually have a deadline. Three to four weeks from first call to settlement is realistic on a clean file.
- 1Day 1, 30 to 45 minutes
Assessment call
The outgoing property, the incoming one, the existing loan, your income after the sale and any fixed dates. We give you a view on whether a bridge works on that call.
- 2Days 1 to 3
Conservative sale estimate
Ideally two agent appraisals. We size the facility against the conservative figure, not the optimistic one, and stress test a nine month sale.
- 3Days 3 to 7
Lender selection and submission
The bridging lender pool is small and each product behaves differently on term, extension policy and whether both properties are taken as security.
- 4Week 2
Two valuations
Both the incoming and the outgoing property are valued. The outgoing valuation is the one that determines whether the peak debt ratio works.
- 5Week 2 to 3
Approval and documents
Approval sets the peak debt, the term and the end debt structure. We check that the end loan is set up at the same time so the handover after the sale is clean.
- 6Week 3 to 4
Settlement of the purchase
The bridge settles the new property. You move. No repayments start.
- 7Months 1 to 12
Sale campaign
Interest capitalises quietly in the background. We keep an eye on the term against the campaign and talk early if the market is slower than expected.
- 8At sale settlement
Discharge and conversion
Sale proceeds clear the bridge including accumulated interest. Any surplus reduces the end debt or returns to you, and the end loan begins.
FAQ
Common questions about bridging finance
Answers to the questions we are asked most often. If yours is not here, ask us directly.
On modern bridging products, generally no. Interest is capitalised, meaning it accrues and is added to the balance, and the whole amount is repaid when the outgoing property sells. That is the key difference from older bridging structures, which required you to service both loans at once.
Usually six to twelve months, with twelve months being the common maximum for residential bridging. The term is set to give you enough time to sell without a fire sale, and it ends when that sale settles.
This is the real risk. Lenders have different approaches, ranging from a short extension to requiring the property be sold at auction. Before taking bridging finance you should have a realistic view of the sale price and timeframe, and a plan for what happens if the market moves against you. We stress test a nine month sale before recommending it.
The rate sits above a standard home loan, typically by one to three percentage points, and there are establishment fees and two valuations. On a six month bridge over $700,000 the total often lands between $27,000 and $38,000. Whether that is expensive depends on the alternative, which is often selling first and renting, or losing the property you wanted.
Total borrowing at its highest point: your existing loan, plus the purchase price and costs of the new property, plus the capitalised interest for the bridging term. Most lenders want peak debt at or below 80% of the combined value of both properties.
What remains after the outgoing property sells and the net proceeds are applied. This is the loan you will actually be servicing afterwards, and it is the figure the lender assesses your income against. For a downsizer, end debt is often nil.
Yes, and retirees are the core market for capitalised bridging. Because no repayments fall due during the term and the loan is assessed against the end debt rather than the peak, a fixed retirement income is far less of an obstacle than it was under older structures.
Often yes. Bridging can complete the acquisition up to around 80% of value, after which the property can be sold or refinanced as a completed dwelling with a real valuation rather than a developer price. It is not cheap, but it is usually better than losing the deposit.
Not always, but a realistic appraisal is essential and most lenders want to see the sale campaign underway or about to start. The facility is sized against the expected sale price, so a credible figure is the starting point.
Yes, and it is one of the situations it suits best. It can hold the family home while a property settlement works through, or fund one party into a new home before the joint property sells. Lenders generally require a letter from the family lawyer confirming the position.
It depends entirely on the purpose of the borrowing and the use of the properties. Interest on borrowing to acquire an income producing asset is generally deductible, interest relating to a private residence generally is not. This is a question for your accountant and we will not guess at it.
It is set by peak debt against the combined value of both properties, commonly capped around 80%. On a $1.4 million home and a $900,000 purchase, that is a combined value of $2.3 million and a peak debt ceiling around $1.84 million, which is comfortably above most downsizer scenarios.
Some products allow a single security structure, which suits situations where the outgoing property cannot easily be mortgaged, such as some separation scenarios. The lender pool is smaller and the terms differ. We will tell you which products are available for your circumstances.
Three to four weeks from first call to settlement on a clean file, which is faster than standard lending because the situations that need it usually have a deadline. The two valuations are typically the longest step.
You can sell the new property or the old one and discharge the facility. You will still have paid the establishment costs and the accrued interest to that point. Bridging is not a decision to make loosely, which is why we stress test it before recommending it.
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