Bridging Loans Australia 2025: Buy Before You Sell (Complete Guide)

Bridging Loans Australia 2025: Your Complete Guide to Buying Before You Sell

Found your dream home but haven't sold your current property yet? A bridging loan lets you purchase your new home while waiting for your existing property to sell—eliminating the stress of timing two transactions perfectly.

Key Takeaways

• Bridging loans "bridge" the gap between buying and selling
• Bank rates from 6.5-8.5% p.a.; private lenders from 9-14% p.a.

• Terms typically 6-12 months (up to 24 months available)
• Two types: Open bridge (not yet sold) and Closed bridge (exchanged contracts)

• Peak debt = your maximum borrowing during the bridging period
• Most lenders require 20-50% equity in your current home

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What is a Bridging Loan?

A bridging loan is short-term finance that allows you to purchase a new property before selling your existing one. It "bridges" the financial gap between the two transactions.

How It Works

Without Bridging Loan:

• List current home for sale
• Wait for sale to complete (uncertain timeline)

• Find and purchase new home
• Risk: Miss out on desired property

With Bridging Loan:

• Find desired new property
• Secure bridging finance

• Purchase new property immediately
• Sell current property within loan term

• Pay out bridging loan from sale proceeds

Open vs Closed Bridging Loans

Type	Definition	Risk Level	Typical Rate
Closed Bridge	You've exchanged contracts on your current home with confirmed settlement date	Lower	6.5-9% p.a.
Open Bridge	Your current property is not yet sold	Higher	7.5-12% p.a.

Lender Preference: Closed bridges are easier to obtain and have lower rates because the exit (sale proceeds) is confirmed.

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Understanding Peak Debt vs End Debt

This is the most important concept in bridging finance.

Peak Debt

Your maximum debt during the bridging period—when you hold BOTH properties and their loans simultaneously.

Calculation:
Peak Debt = New Property Loan + Existing Property Loan

End Debt

Your final debt after selling your current property and repaying its loan.

Calculation:
End Debt = Peak Debt - Sale Proceeds from Current Property

Visual Example

Your Current Situation:

• Current home value: $900,000
• Current mortgage: $400,000

• Current equity: $500,000

New Property:

• Purchase price: $1,200,000
• Deposit required: $120,000 (10%)

• Loan needed: $1,080,000

Bridging Period (Peak Debt):
```
Current mortgage: $400,000
New property loan: $1,080,000
────────────────────────────
Peak Debt: $1,480,000 ← Maximum exposure
```

After Sale (End Debt):
```
Peak Debt: $1,480,000
Less sale proceeds: -$900,000
Add selling costs: +$25,000
────────────────────────────
End Debt: $605,000 ← Final mortgage on new home
```

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Bridging Loan Rates (January 2025)

Current Market Rates

Lender Type	Interest Rate	Typical LVR	Speed
Major Banks	6.5-8.5% p.a.	Up to 80%	2-4 weeks
Non-Bank Lenders	7.5-10% p.a.	Up to 80%	1-2 weeks
Private Lenders	9-14% p.a.	Up to 75%	3-7 days

Bank Bridging Products

Commonwealth Bank: Offers bridging up to 6 months. Variable rate tied to home loan rate + margin.

ANZ: Bridging finance up to 12 months. Interest typically capitalised (added to loan).

Westpac: Bridging facilities available. Requires clear servicing for end debt position.

NAB: Offers bridging solutions. Prefers closed bridges with confirmed sale.

Interest Payment Options

1. Interest Capitalised (Most Common)

• No monthly payments during bridging period
• Interest added to loan balance

• Pay everything when current property sells

2. Interest Only Payments

• Make monthly interest payments during bridge
• Lower total interest cost

• Requires income servicing

3. Combination

• Interest only on end debt portion
• Capitalise interest on temporary bridging portion

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Bridging Loan Requirements

Eligibility Criteria

Standard Bank Requirements:

• ✅ Sufficient equity in current property (typically 20%+)
• ✅ Ability to service END debt (after sale)

• ✅ Realistic sale price for current property
• ✅ Reasonable sale timeframe (typically 6-12 months)

• ✅ Good credit history
• ✅ Stable income

Private Lender Requirements:

• ✅ Sufficient equity in current property
• ✅ Clear exit strategy

• ✅ Property acceptable as security
• ❌ Credit history less critical

• ❌ Income verification minimal

Documentation Checklist

For Current Property:
☐ Recent rates notice (council)
☐ Current mortgage statement
☐ Sales agent appraisal (if not yet listed)
☐ Contract of sale (if sold)

For New Property:
☐ Contract of sale (signed)
☐ Deposit paid receipt

Personal Documentation:
☐ Identification
☐ Income verification (bank applications)
☐ Asset and liability statement
☐ Current loan statements

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The Bridging Loan Process

Timeline: Bank Bridging Loan

Week 1:

• Initial application submitted
• Preliminary assessment

• Valuations ordered for both properties

Week 2:

• Full credit assessment
• Income and servicing verification

• Valuations received

Week 3-4:

• Formal approval
• Legal documentation prepared

• Settlement scheduled

Week 4-6:

• Funds available for new purchase
• Bridging period begins

Total: 4-6 weeks

Timeline: Private Bridging Loan

Day 1-2:

• Application and preliminary approval
• Valuations ordered

Day 3-5:

• Valuations received
• Formal approval

• Documentation prepared

Day 5-7:

• Settlement of bridging facility
• Funds available

Total: 5-7 business days

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Bridging Loan Costs

Cost Components

Cost Type	Bank	Private
Interest rate	6.5-8.5% p.a.	9-14% p.a.
Establishment fee	0-0.5%	1-3%
Valuation fees	$600-$1,200	$600-$1,200
Legal costs	$1,000-$2,000	$1,500-$3,000
Exit/discharge fee	$0-$350	$0-$500

Cost Example: 6-Month Bridge

Scenario:

• Bridging amount: $400,000
• Duration: 6 months

• Interest capitalised

Bank (7% p.a.):

Component	Amount
Interest (6 months)	$14,000
Establishment	$0
Valuation	$800
Legal	$1,200
Total Cost	$16,000

Private Lender (11% p.a., 2% establishment):

Component	Amount
Interest (6 months)	$22,000
Establishment	$8,000
Valuation	$800
Legal	$2,000
Total Cost	$32,800

Difference: $16,800 (but private settles 3-4 weeks faster)

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Case Study: The Thompson Family

Situation:
Sarah and Michael Thompson found their dream home in Berwick, Victoria, listed at $1.1 million. Their current home in Narre Warren is worth $850,000 with a $300,000 mortgage.

Challenge:
The dream home had multiple interested buyers. Waiting to sell first would likely mean missing out.

Solution:
They obtained a bridging loan to purchase immediately:

• Current home value: $850,000
• Current mortgage: $300,000

• New home purchase: $1,100,000
• Deposit (10%): $110,000 (from savings)

• New loan required: $990,000

Peak Debt: $300,000 + $990,000 = $1,290,000
End Debt: $1,290,000 - $850,000 + $25,000 selling costs = $465,000

Outcome:

• Purchased dream home with 28-day settlement
• Listed Narre Warren property

• Sold within 8 weeks for $870,000
• Repaid bridging facility

• Final mortgage: $445,000 at standard variable rate

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Risks and How to Manage Them

Risk 1: Property Doesn't Sell

The Concern: What if your current property takes longer to sell or doesn't achieve expected price?

Mitigation:

• Get realistic agent appraisals before committing
• Price property competitively from the start

• Have backup plans (rent it out, price reduction)
• Choose bridging term with buffer (12 months not 6)

Risk 2: Peak Debt Stress

The Concern: Servicing two loans simultaneously can strain finances.

Mitigation:

• Capitalise interest during bridging period
• Maintain cash reserves for contingency

• Consider interest-only on end debt
• Budget conservatively

Risk 3: Property Values Fall

The Concern: Your property sells for less than expected, leaving you with larger end debt.

Mitigation:

• Get valuations from multiple agents
• Don't over-leverage at purchase

• Have equity buffer built in
• Stress test with 10-15% lower sale price

Risk 4: Interest Rate Increases

The Concern: Variable bridging rates could increase during your bridge period.

Mitigation:

• Factor in potential rate rises
• Keep bridging period short

• Consider fixed-rate options if available
• Maintain buffer in calculations

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Bank vs Private Bridging: Which to Choose?

Choose Bank Bridging When:

• ✅ You have 4+ weeks before settlement needed
• ✅ Your income and credit are strong

• ✅ You want the lowest rate
• ✅ You're comfortable with extensive documentation

• ✅ You have a closed bridge (property sold)

Choose Private Bridging When:

• ✅ Settlement needed in 1-2 weeks
• ✅ Bank has declined or too slow

• ✅ Credit history has issues
• ✅ Income is complex (self-employed)

• ✅ Open bridge and bank won't approve

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Frequently Asked Questions

How much can I borrow with a bridging loan?

Most lenders allow up to 80% LVR against both properties during the bridging period. Your maximum borrowing depends on combined equity in both properties and your ability to service the end debt.

Can I get a bridging loan with bad credit?

Banks will typically decline. However, private bridging lenders focus primarily on property equity and exit strategy. Credit issues including defaults, judgments, or low scores may not prevent approval.

What if my property doesn't sell within the bridging term?

Options include: loan extension (with lender agreement and additional fees), price reduction to achieve sale, or refinancing to a different product. Communicate with your lender early if sale is taking longer than expected.

Do I have to make repayments during the bridging period?

Not necessarily. Most bridging loans offer capitalised interest—meaning interest is added to the loan and repaid when you sell. This reduces cash flow pressure but increases total cost.

Can I use bridging finance for investment properties?

Yes, bridging finance isn't limited to owner-occupied homes. Investors commonly use bridging to acquire new investments while selling existing properties or arranging longer-term finance.

How long can a bridging loan last?

Typically 6-12 months, with some lenders offering up to 24 months. Shorter is usually better to minimize interest costs. Most properties should sell within 6 months if priced correctly.

What's the difference between bridging finance and a line of credit?

Bridging finance is specifically structured for buying before selling—with peak debt reducing to end debt after sale. A line of credit is an ongoing facility you can draw from repeatedly.

Can I get pre-approved for bridging finance?

Yes, many lenders offer pre-approval so you can bid at auction or make offers with confidence, knowing your bridging facility is ready. Pre-approval is typically valid for 3-6 months.

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Bridging Loan Checklist

Before applying for bridging finance:

☐ Get realistic appraisals for your current property (at least 2 agents)
☐ Calculate your peak debt and end debt positions
☐ Confirm you can service the end debt (with your bank or broker)
☐ Understand your timeframe for sale (realistic, not optimistic)
☐ Review your first mortgage terms (any penalties for payout?)
☐ Budget for all costs (stamp duty on new property, agent fees on sale, bridging costs)
☐ Have contingency plans (what if sale takes 3 months longer?)

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Get Started with Bridging Finance

Ready to buy before you sell? Here's your action plan:

• Calculate your position - Use the peak debt / end debt framework above
• Get property appraisals - Know what your current property is worth

• Assess timeframe - How quickly do you need to settle on the new property?
• Compare options - Bank vs private, get multiple quotes

• Apply with confidence - Choose the option that fits your situation

On Introducr, you can post your bridging finance request and receive competitive offers from verified lenders within 48 hours. Compare rates, terms, and approval timeframes side by side.

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Disclaimer: Bridging finance involves short-term borrowing secured against property. Ensure you understand all costs and risks. This information is general in nature—seek independent financial advice for your situation.

Last updated: January 2025