Bridging Finance Explained: Buy Before You Sell

When buying before selling makes sense

For many Australian homeowners, the dream upgrade hits a practical snag: you need to sell your current home to fund the next one, but you don't want to sell without somewhere to go. Bridging finance solves this timing problem.

Bridging loans let you purchase your new property while your existing home is still on the market (or hasn't even been listed yet). You hold both properties temporarily, with the bridging loan covering the gap until your sale settles.

This strategy makes sense when:

• You've found your ideal next home and don't want to lose it
• You need time to prepare your current property for sale (renovations, styling)
• You want to avoid the stress, cost, and uncertainty of renting between properties
• You're in a competitive market where buying opportunities are scarce
• You're moving to a different area and need overlap for work, school, or family reasons

How bridging finance works in practice

The peak debt concept

The key to understanding bridging finance is "peak debt" — the maximum amount you owe at the point where you hold both properties:

Peak debt = Existing mortgage + New purchase price + Stamp duty & costs – Your deposit (if any)

For example:

• Current home value: $900,000 (mortgage: $300,000)
• New home purchase: $1,200,000
• Stamp duty & costs: ~$55,000
• Peak debt: $300,000 + $1,200,000 + $55,000 = $1,555,000

This is a big number. Lenders assess whether you can service this peak debt, even though it's temporary.

The bridging period

During the bridging period (typically 6–12 months), you're making interest-only payments on the peak debt, or more commonly, the lender capitalises the interest on the bridging portion. This means the interest accrues and is added to the loan balance rather than requiring monthly payments.

Your ongoing payments during this period are typically:

• Interest-only on the new loan, OR
• Capitalised interest (no payments required on the bridging portion)
• Plus your existing mortgage repayments until it's discharged

After the sale

When your existing property sells and settles, the sale proceeds are applied to:

1. Discharge your existing mortgage
2. Pay down the bridging loan balance (including any capitalised interest)
3. Any remaining surplus reduces the new loan further

The remaining debt converts to a standard home loan on your new property at normal rates.

What does bridging finance cost?

Interest rates

Bridging loan rates are typically 1–2% above standard variable home loan rates. In 2026, expect:

• Standard variable: ~6.0–6.5%
• Bridging rate: ~7.5–9.0%
• Some lenders: Charge the standard rate on the ongoing portion and a premium rate only on the bridging portion

The real cost: worked example

Using the scenario above (peak debt of $1,555,000 for 6 months at 8%):

• Interest on bridging portion during 6-month bridge: ~$45,000
• If capitalised (not paid monthly), this is added to the debt
• Application and valuation fees: $500–$1,500
• Discharge and settlement fees: $300–$600

Total bridging cost: approximately $46,000–$47,000

This sounds steep, but compare it to the alternatives:

• Selling first and renting for 6 months: $20,000–$30,000 in rent + $5,000–$10,000 in two moves + the risk of prices rising while you rent
• Missing out on your ideal property: potentially priceless if the market moves against you

Eligibility and lender criteria

Who qualifies?

• Homeowners with equity: You typically need at least 20% equity in your current property (factoring in both mortgages)
• Income serviceability: You must demonstrate ability to service the peak debt, at least at interest-only levels
• Exit strategy: The lender needs confidence your existing property will sell. A listed property or an unconditional sale contract strengthens your application significantly
• Clean credit history: Standard credit assessment applies

What lenders look for

• LVR across both properties: Most lenders want the combined LVR to stay below 80% at peak debt. Some specialist lenders allow higher
• Sale evidence: Having your property listed, under contract, or at least market-appraised gives the lender confidence in your exit plan
• Realistic sale price: The lender will commission their own valuation of your existing property. If there's a gap between your expected sale price and their valuation, it can affect the bridging amount approved
• Time on market: Lenders in your suburb's average days-on-market to assess the risk. A slow market may attract stricter terms