A bridging loan is short-term finance that lets you buy your next home before your current one has sold. The lender calculates peak debt — your existing mortgage plus the new purchase and costs — and end debt, being what remains once the sale proceeds are applied. Most bridging terms run 6 to 12 months, interest is usually capitalised rather than paid monthly, and lenders assess your ability to service the end debt rather than the peak.
Bridging finance is easier to understand as two numbers. Peak debt is everything you owe while both properties are held. End debt is what is left after the old property sells and the proceeds are applied.
Worked example: current home valued at $900,000 with a $300,000 mortgage, buying a $1,100,000 replacement.
| Component | Amount | Note |
|---|---|---|
| Existing mortgage | $300,000 | Rolls into the bridging facility |
| New purchase price | $1,100,000 | The property you are buying |
| Stamp duty and costs | $55,000 | Varies by state — model your own |
| Peak debt | $1,455,000 | Total owing while you hold both properties |
| Expected sale proceeds | $880,000 | After agent fees and selling costs |
| End debt | $575,000 | What remains — and what the lender assesses you on |
Lenders assess serviceability on the end debt, not the peak. That is what makes bridging viable: you are not required to prove you can service $1,455,000, only the $575,000 you will be left with.
Your existing property is already under an unconditional contract with a known settlement date. Lower risk to the lender, better pricing, and far easier to get approved.
Your property is not yet sold. The lender is relying on a valuation and your estimate. Expect a higher rate, a lower maximum LVR, and a shorter term.
Interest accrues onto the loan balance rather than being paid monthly, so you are not funding two mortgages at once. It compounds, which is why the term length matters.
You pay interest monthly during the bridging period. Cheaper overall, but you need the cash flow to carry both properties simultaneously.
The central risk in open bridging is over-estimating the sale price. Price the existing property conservatively when modelling end debt. If the numbers only work at an optimistic sale price, the structure is too tight.
Bridging is the right tool when the property you want will not wait and your current home is genuinely saleable. It is an expensive way to solve a problem that a longer settlement would have solved for free.
Short-term finance that covers the gap between buying your next home and selling your current one. The lender funds the combined position, known as peak debt, and the loan reduces to the end debt once your existing property sells and the proceeds are applied.
Typically 6 months where the existing property is already under contract, and up to 12 months where it is not yet sold. Extensions are possible but usually attract a higher rate. Running past the term is where bridging becomes expensive.
Usually not. Most bridging facilities capitalise the interest onto the loan balance so you are not servicing two mortgages simultaneously. Some lenders offer a serviced option where you pay interest monthly, which costs less overall if your cash flow supports it.
The loan typically reverts to a higher rate, and the lender may require the property to be sold. Because interest has been capitalising throughout, the balance will have grown. This is the main reason to price the existing property conservatively and to prefer closed bridging.
Lenders generally cap peak debt at around 80% of the combined value of both properties, and assess your serviceability on the end debt. The end debt is the real constraint — if you cannot service it as a standard loan, the bridge will not be approved.
Bridging is more restricted than standard lending. Of the 10 lenders NIK Finance models in full policy detail, 5 offer bridging finance: ANZ, CBA, NAB, Qudos Bank, Firstmac. Terms, maximum LVR and whether open bridging is accepted vary between them.
Bridging only works if the end debt is serviceable and the sale estimate is realistic. We will run both numbers with you, and tell you plainly if a longer settlement would do the job instead.
NIK Finance Pty Ltd (ACN 685 393 917) is a Credit Representative (567387) of Finsure Finance & Insurance Pty Ltd (Australian Credit Licence 384704). This page is general information only and does not constitute financial advice. Consider your personal circumstances and speak with a licensed broker before applying for credit.