How Bridging Loans Work in Australia
A bridging loan is a short-term loan designed to cover a timing gap between purchasing a new property and selling an existing one. Here is the typical sequence:
Step 1: Make an offer on the new property. You have found a property you want to buy, but your existing property has not yet sold. You make an offer on the new property.
Step 2: Apply for bridge finance. Once your offer is accepted, you apply for a bridge loan. You will need to provide details of your existing property (its appraised value and any existing mortgage) and the expected sale timeline. The bridge lender assesses whether your existing property provides sufficient equity to secure the bridge.
Step 3: Bridge loan settles. The bridge loan is approved and settles, providing you with the funds to purchase the new property. You now own both properties but the existing property is on the market.
Step 4: Pay bridge interest only. During the bridge term (typically 6-12 months), you pay interest on the bridge loan but not principal. You are only paying interest, not reducing the debt.
Step 5: Existing property sells. Your original property sells and settles. Sale proceeds go to repay the bridge loan in full.
Step 6: Refinance new property permanently. Once the bridge is repaid, the new property is refinanced into a standard 25-30 year home loan at standard rates. This becomes your permanent mortgage.
Bridge term. Most bridges last 6-12 months, with 6 months being typical. Some lenders extend bridges to 24 months for complex situations, but bridging is always intended as temporary financing, not a long-term product.
Interest-only structure. Bridge loans are interest-only because the intent is that they will be repaid in full when your original property sells. You are not building equity during the bridge term – you are simply covering the cash flow gap.
When Do You Need a Bridging Loan?
Bridging finance is useful in three main scenarios:
Scenario 1: Buy before you sell. You have found the property you want to buy, but your current property has not yet sold. Property markets move fast – if you wait for your property to sell before making an offer on the new one, you might miss the opportunity. Bridging lets you purchase immediately while your existing property sells in its own time.
Scenario 2: Auction purchases. You won a property at auction but the property needs to settle within 60-90 days. You do not yet have finance approved on the property. Bridge finance provides the purchase price while you secure long-term finance. Once long-term finance settles, the bridge is repaid.
Scenario 3: Investment property timing. You want to purchase an investment property and your existing property sale timeline is uncertain. Rather than missing the investment opportunity or selling at an unfavourable time, bridging lets you purchase when the opportunity is right and repay when your existing property sells.
When bridging might not be necessary: If you have liquid savings equal to the purchase price of the new property, you do not need bridging – you can purchase directly. If you can get a cash advance from a bank against equity in your existing property, that might be cheaper than bridging. If you are willing to wait for your property to sell before making an offer on the new one, bridging is not necessary.
Bridging Loan Costs and Fees Breakdown
Bridging loans carry several costs beyond the interest rate:
Interest rate. Typical bridging rates are 1-2% above standard home loan rates. With standard home loan rates around 5.74-6.19% in May 2026, bridging rates typically run 6.74-8.19%. The exact rate depends on your loan-to-value ratio (LVR) on your existing property – the more equity you have, the lower the rate.
Interest cost calculation. For a $300,000 bridge loan at 7.5% interest over 6 months: Interest = $300,000 × 7.5% ÷ 2 = $11,250. This is paid monthly, not upfront – approximately $1,875 per month for 6 months.
Application and establishment fees. Most bridge lenders charge $500-$2,000 in upfront fees to process and approve your bridge loan.
Valuation fees. The lender will require a valuation of your existing property to assess its equity. Valuation fees are typically $300-$600.
Exit fees. When you repay the bridge loan, lenders typically charge $500-$1,500 in exit or discharge fees.
Total cost example. For a $300,000 bridge loan at 7.5% over 6 months with standard fees:
- Interest: $11,250
- Establishment fee: $1,500
- Valuation fee: $400
- Exit fee: $1,000
- Total cost: $14,150 (4.7% of loan amount)
Compare this to the cost of holding your existing property unsold for an additional 6 months (rates, maintenance, agent fees), and bridging may be cost-effective.
Bridging Loans vs Alternative Financing
Bridging is not the only option for buy-before-sell situations. Here is how it compares to alternatives:
| Financing Option | Rate | Term | When It's Best | Key Drawback |
|---|---|---|---|---|
| Bridge loan | 7.5-8.5% | 6-12 months | Quick purchase needed, sale timeline 6-12mo | Expensive short-term product |
| Home equity loan | 6.5-7.5% | 5-10 years | Slow property sales, 12+ months to completion | Long-term debt if sale delayed |
| Personal loan | 8-12% | 3-7 years | Small purchase gap (under $100k) | Much higher interest than bridging |
| Wait to sell first | N/A | Flexible | No timing pressure on purchase | May miss desired property |
| Increase existing mortgage | 6.5-7% | Permanent | If lender allows top-up on existing property | Increases permanent debt; not all lenders allow |
For most buy-before-sell scenarios where the sale is expected within 6-12 months, bridging is the most cost-effective option. For situations where the sale might take 12-24 months, a home equity loan becomes more attractive because the lower interest rate compensates for the longer term.
Real Cost Example: $400,000 Bridge Loan
Let's work through a real example. You want to purchase a new property for $600,000, but your existing property (valued at $500,000 with a $250,000 mortgage) has not yet sold. You need bridge finance for 8 months.
Loan amount: $600,000 (new property price, assuming you pay costs)
Bridge loan: $350,000 (purchase price less your 5% deposit you can access = $30k from savings)
Equity in existing property: $500,000 value – $250,000 mortgage = $250,000 equity = 50% LVR
Bridge rate: 7.5% (reasonable for 50% LVR)
Costs over 8 months:
- Interest: $350,000 × 7.5% × (8/12) = $17,500
- Establishment fee: $1,500
- Valuation: $400
- Exit fee: $1,000
- Total bridge cost: $20,400
Compare to holding costs of unsold property for 8 months:
- Mortgage payments (interest component): ~$4,800 (still paying this anyway)
- Rates and property taxes: ~$1,200
- Maintenance/insurance: ~$800
- Agent marketing (if it eventually sells): ~$3,000
- Holding cost: ~$9,800
Net bridge cost: $20,400 – $9,800 = $10,600 extra to hold both properties for 8 months. On a $600,000 property purchase, this is often worth avoiding missing the right property or being forced to sell at an inopportune time.
Which Lenders Offer Bridging Loans in Australia?
Bridging loans are specialist products offered by a smaller set of lenders than standard home loans. Major banks offer bridging, but non-bank bridging specialists often provide faster approval and more flexible terms.
Major banks: Commonwealth, Westpac, NAB and ANZ all offer bridging loans, though approval timelines are typically 10-14 days and they may have stricter equity requirements (often requiring 30%+ equity in existing property).
Non-bank bridging specialists: Companies specialising in bridging loans often have faster approval (5-7 days), more flexible equity requirements (accept 20%+ equity), and more experienced underwriters. They also typically offer longer bridge terms (up to 24 months) and are more accustomed to unusual situations.
Second-tier banks: Some second-tier banks offer bridging products, though usually at rates and terms between major banks and non-bank specialists.
Using a broker. A mortgage broker can access bridging lenders across all categories and present multiple options with different rates and terms. Brokers often have pre-established relationships with bridging specialists that accelerate approvals. Given the specialist nature of bridging, using a broker is often worth the saved time and potential rate negotiation.
Key Risks to Consider with Bridging
Risk 1: Your original property doesn't sell within the bridge term. If your existing property has not sold by the bridge expiry date, you must either extend the bridge (usually at a higher rate), refinance to a long-term loan (converting expensive short-term bridge debt into permanent debt), or push harder to sell. Plan your bridge term conservatively – build in 2-3 months of buffer.
Risk 2: Market downturn affects property values. If property values decline during your bridge period, your equity position worsens. For example, if your existing property was valued at $500,000 when you took the bridge but drops to $450,000 before it sells, your equity buffer shrinks. In extreme cases, if your property is now worth less than your mortgage, it becomes hard to exit the bridge.
Risk 3: Interest rate rises affect serviceability. If you extend the bridge or refinance to a long-term loan and interest rates have risen, your ongoing repayments become more expensive. Lock in fixed rates on the new property loan early if possible.
Risk 4: Psychological pressure from carrying two properties. The stress of carrying two properties (with two sets of payments, rates, insurance, maintenance) is real. Some borrowers become desperate to sell the original property, potentially accepting a lower price than warranted.
Risk 5: Bridge loan default if you can't pay interest. Bridge loans are still loans – if you fail to pay the monthly interest, the lender can enforce the security against your existing property. This is rare but a genuine risk if your financial circumstances deteriorate during the bridge term.
Mitigating risks: (1) Choose a conservative bridge term – if you think your property will sell in 6 months, take a 9-month bridge and extend only if needed; (2) Maintain adequate financial reserves to cover bridge interest if your property takes longer to sell; (3) Price your existing property competitively and engage a good real estate agent; (4) Consider whether a longer home equity loan might be more stable than hoping to exit bridge quickly.
Need Bridge Finance? We Can Help
Our specialists can connect you with bridging lenders and help structure a bridge loan for your buy-before-sell situation. We compare rates from multiple lenders and can often negotiate faster approvals.
Explore Bridge Options →