Question 1

What is bridging finance in Australia?

Accepted Answer

Bridging finance is a short-term loan that 'bridges' the financial gap between purchasing a new property and settling the sale of your existing one. It allows you to buy your new home before your old property has sold or settled, without needing to arrange simultaneous settlement.  Bridging loans are offered by Australian banks, non-bank lenders and specialist financiers, typically for terms of 6 to 12 months.

Question 2

What is 'peak debt' in a bridging loan?

Accepted Answer

Peak debt refers to the maximum loan balance during the bridging period, the total of your:  1. Existing home loan balance (if applicable) 2. New property purchase price (or loan required) 3. Interest and fees capitalised during the bridge term 4. Any other associated costs  Example: If you owe $300,000 on your current home and need $800,000 for your new home, your peak debt is approximately $1,100,000 + capitalised interest.  Once your existing property sells, the sale proceeds reduce peak debt to your ongoing ('end') debt on the new property.

Question 3

What are the typical terms of a bridging loan in Australia?

Accepted Answer

Bridging loans in Australia are typically:  • Duration: 6 to 12 months (sometimes up to 24 months for construction) • Interest: Usually charged monthly or capitalised (added to the loan balance and repaid on sale) • Rates: Generally 1–3% higher than standard variable rates, reflecting the short-term and higher-risk nature • LVR: Maximum LVR during the bridge period is typically 70–80% of the combined properties' value

Question 4

Do I have to make repayments during the bridging period?

Accepted Answer

Many Australian bridging loan products allow you to capitalise the interest, meaning interest accrues and is added to your loan balance rather than requiring monthly cash repayments during the bridge period.  This significantly reduces financial pressure while you're holding two properties and can be advantageous for cash flow. However, it does increase your peak debt.  Some lenders require ongoing interest repayments. Your broker will source the product that suits your cash flow position.

Question 5

What happens if my property doesn't sell during the bridge period?

Accepted Answer

This is the key risk of bridging finance. If your existing property hasn't sold before the bridging term expires:  • You may need to request an extension (subject to lender approval) • Rates may increase after the initial term • In a worst case, you may need to sell the existing property under urgency or at a discount  Mitigating this risk: Our brokers recommend realistic market assessment of your existing property's saleability and price before proceeding with a bridging loan. We can refer you to experienced selling agents.

Question 6

What is simultaneous settlement and is it a good alternative?

Accepted Answer

Simultaneous settlement (or 'same-day settlement') means your existing property sale and new purchase settle on the same day, eliminating the need for bridging finance.  Advantages: • No bridging finance costs or interest • No holding two loans simultaneously  Challenges: • Requires coordinating two conveyancers and two buyer/seller chains • Any delay in one settlement can derail both • More stressful and logistically complex • May limit your ability to negotiate strongly on either property  Bridging finance gives you more flexibility and negotiating power, at the cost of additional interest.

Bridging Finance

How bridging finance works in Australia

Assess existing property value

Calculate peak debt & end debt

Bridging loan approval

Buy your new home

Sell existing property

Ongoing loan established

Understanding peak debt and end debt

Free bridging finance assessment

Bridging loan calculator

Property selling guide

Bridging finance FAQs

Buy your next home without waiting to sell