Updated October 2026 · General information for Australian homeowners.
You've found your dream home. Your current home is not yet sold, and your dream home will not wait for your open-for-inspection schedule. Enter the bridging loan: a short-term loan designed to get you across the gap between buying and selling. Done well, it's a handy tool. Done badly, it's two mortgages and a lot of 3am calculator sessions. Here's how it works.
What is a bridging loan?
A bridging loan (also called bridging finance or a "buy before you sell" loan) is a short-term loan that lets you buy a new property before you've sold your existing one. The lender temporarily finances both properties. When your old home sells, the sale proceeds pay down the loan, and what's left becomes your ongoing home loan.
The two numbers to know: peak debt and end debt
- Peak debt: the highest amount you owe while you own both properties. It's generally your existing loan + the new loan (plus costs such as stamp duty and fees, in many cases).
- End debt: what remains after your old home sells and the net proceeds (sale price less agent fees, marketing, legal costs and loan discharge) are applied.
A worked example (illustration only). Imagine you're buying a new home for $800,000 while your current home is on the market. You still owe $250,000 on your existing mortgage, and you expect to sell it for $600,000.
- Peak debt = $250,000 + $800,000 = $1,050,000 (before costs)
- If your old home sells for $600,000, your end debt is roughly $1,050,000 − $600,000 = $450,000 (before selling costs and any interest that has built up)
Most lenders assess your ability to repay mainly on the end debt, not the peak debt, which is why bridging can work even if you couldn't service both loans permanently. But lenders will also look at the peak debt's loan-to-value ratio, and many cap it at around 75–80% of the combined value of the properties.
How long does it last?
Bridging periods typically run 6 to 12 months. During that time, many lenders let the interest capitalise (add to the loan) so you aren't making full repayments on the peak debt, while others require you to pay at least the interest. If your old home hasn't sold by the end of the period, you may face extension fees, a higher rate or pressure to sell.
Two types of bridging: closed and open
- Closed bridging loan: you've already exchanged contracts to sell your existing home, so the settlement date is known. This is the easiest to get approved and the lowest risk.
- Open bridging loan: your home isn't sold yet. Approval is tougher, and you carry the risk of selling slowly or for less.
Ask your lender whether it offers "true bridging finance" (which assesses you on end debt and has a defined bridging period) or just combines two mortgages with no special treatment. Money magazine commentary points out that many lenders offer something that looks like bridging but doesn't assess you on the end debt.
What does it cost?
- Interest on the peak debt, usually the biggest cost. Illustration: $1,050,000 at 6.5% for six months is about $34,000 in interest, before fees. The longer it takes to sell, the more it costs.
- Application and valuation fees, often two valuations (one for each property)
- Stamp duty on the new purchase (the Victorian first-home exemption wouldn't apply to an established owner)
- Legal and discharge fees on the old loan
- Selling costs on your old home (agent commission, marketing, conveyancing)
- Extension fees if the bridging period runs over
Risks to be honest about
- Your old home doesn't sell within the bridging term, or sells for less than expected
- Interest keeps accruing on your biggest-ever debt
- Rate rises while you're holding both properties
- Cash-flow strain if you must pay interest on the peak debt
- Two sets of holding costs (rates, insurance, maintenance) for a while
- Lenders may require a realistic sale price and may insist you price to sell
Alternatives to consider
- Sell first, then buy. Simple and safe. You may need to rent briefly or negotiate a long settlement.
- Negotiate a longer settlement on your purchase, or a shorter one on your sale, to line the dates up.
- Make your offer "subject to the sale of your property." Vendors often don't love it, but it's an option in private sales. Bridging can help you make a cleaner "subject to finance" offer instead.
- Use equity from your existing home (a top-up or separate loan) to fund the deposit, then sell later.
- Hold a rental period: sell, rent for a few months and then buy.
- Ask about a deferred or extended settlement with the vendor.
Checklist: before you apply for bridging finance
- Estimate the value of your current home with a realistic agent appraisal (not the hopeful one)
- Know your current loan balance and what you could net after selling costs
- Calculate peak debt and end debt, including stamp duty and fees
- Check the lender's maximum peak LVR (often about 75–80%) and bridging term
- Ask whether interest is capitalised or must be paid
- Ask whether it's a true bridging loan assessed on end debt
- Consider whether you can afford the interest if the sale takes 12 months
- Ask about extension fees and rates if you run over
- Plan your sale strategy: agent, price, timing and marketing
- Speak to your conveyancer about contract dates, finance clauses and settlement
- Speak to a broker to compare bridging options across lenders
- Keep an emergency buffer for surprises
A bit of lightness
Bridging finance is a bit like holding a ladder between two rooftops. It can be useful, it's never relaxing, and you definitely don't want a bunch of people shaking the ladder in the form of slow buyers or surprise rate rises. Plan the whole route before you step on.
Official links
- MoneySmart (ASIC), buying and selling a home: https://moneysmart.gov.au
- Consumer Affairs Victoria, buying and selling property: https://www.consumer.vic.gov.au
- State Revenue Office Victoria (stamp duty): https://www.sro.vic.gov.au
- Australian Competition and Consumer Commission, consumer guides: https://www.accc.gov.au
Disclosure and Disclaimer
This article is general information only and is not financial, credit, legal, tax or investment advice. It does not consider your objectives, financial situation or needs. Examples are illustrations, not quotes, and lender policies, interest rates and fees change often. Please do your own research and obtain independent advice from a licensed financial adviser, mortgage broker, accountant and conveyancer or solicitor before making any decision. Loan approvals are subject to lender criteria. To the maximum extent permitted by law, our business, its directors, employees and brokers accept no liability for any loss or damage arising from reliance on this article.
Disclaimer: The information in this article is general in nature and does not constitute personal financial or credit advice. Speak with Amber Finance so we can look at your own situation in detail.