Bridging Loans

A bridging loan is a short-term finance solution that allows you to purchase your next property before your existing home is sold. Rather than waiting for settlement on your current property, you can act quickly in a competitive market, avoid temporary rental costs, and move directly from one home to another.

Bridging finance is common for homeowners upgrading their home and for those who want to refinance during a property transition. The Lagos Financial team can help you assess whether bridging suits your circumstances and structure it correctly to manage risk.

How Bridging Finance Works

When you take out a bridging loan, your lender combines the debt on your existing property with the loan required for the new purchase into a single facility. You make interest-only repayments (or in some cases, capitalised interest) during the bridging period. Once your existing property sells, the net proceeds are applied to reduce the combined loan, leaving your ongoing (end) loan on just the new property.

The key concept is peak debt — the maximum combined loan balance you carry during the bridging period. For example:

Existing property debt: $350,000
New property purchase price: $900,000
Peak debt: $1,250,000 (plus capitalised interest and costs)

After selling the existing property for $600,000 (net), the end loan would be: $1,250,000 − $600,000 = $650,000 on the new property.

Open vs Closed Bridging

Closed Bridging Loans

A closed bridge is where you have already exchanged contracts on the sale of your existing property but settlement has not yet occurred. Because the sale price and settlement date are known, the lender has certainty about when peak debt will be repaid. Closed bridging typically attracts lower rates and is more readily approved.

Open Bridging Loans

An open bridge is where your existing property is not yet under contract. You are carrying the risk that it will sell — and for how much. Lenders are more cautious with open bridging: they’ll stress-test the sale price, may apply a lower assumed selling figure for serviceability, and may charge a premium rate. Open bridging is typically capped at 6 months.

Bridging Period and Timeline

Most bridging loans in Australia run for 6 to 12 months, with 6 months being the most common approved term. Some lenders offer up to 12 months for open bridges or for properties in slower markets. During the bridging period, interest is either:

Capitalised: Added to the loan balance daily and repaid in full at the end of the bridging period. No repayments are required during the bridge, simplifying cash flow but increasing peak debt.
Paid monthly: Interest-only repayments are made on the peak debt for the duration of the bridge. This limits the growth of peak debt but requires you to service both properties simultaneously.

Interest Rates on Bridging Loans

Bridging loans are priced at the lender’s standard variable rate plus a premium — typically 0.5% to 1.5% per annum above the standard variable rate. As at March 2026, bridging rates from major lenders range from approximately 6.5% to 8.5% p.a., depending on LVR, peak debt, and the applicant’s financial profile. This cost reinforces why minimising the bridging period is important.

Risks of Bridging Finance

Selling for less than expected: If your existing property sells for less than anticipated, your end loan is higher than planned. Always build a conservative buffer into your peak debt calculations.
Failure to sell: If the existing property doesn’t sell within the bridging period, you may face pressure from the lender to extend or discharge the facility. In extreme cases, the lender may require a forced sale.
Two properties at once: Holding two properties simultaneously — even for a few months — means rates, council rates, insurance, and maintenance costs for both. Cash flow management is essential.
Market timing risk: Buying at the peak before selling at the trough can erode equity significantly.

Alternatives to Bridging Finance

Sell first, then buy: Eliminates bridging risk entirely but may mean temporary rental accommodation.
Subject to sale clause: Making an offer on a new property conditional on your current property’s sale. Sellers in strong markets rarely accept this.
Deposit bond: A guarantee that substitutes for a cash deposit at exchange — useful if your equity is tied up in your existing property.
Equity access from existing home: Using a home loan top-up or equity release to fund the deposit on the new property without full bridging.

Frequently Asked Questions

How much can I borrow with a bridging loan?

Most lenders cap bridging at 80% of the combined value of both properties (peak debt LVR). Some specialist lenders will go to 85–90%, but at a significantly higher rate. The lender will also assess your capacity to service the end loan after the existing property sells.

Do I need to make repayments during the bridging period?

This depends on your lender and structure. Many borrowers opt for capitalised interest during the bridge — meaning no repayments are required, but the interest compounds and is added to the loan balance. This is convenient but can increase your end loan materially if the bridge runs for 6–12 months.

Can I use a bridging loan for investment property?

Yes — bridging is available for both owner-occupied and investment property transitions, though lenders assess them differently. Investment bridging typically has stricter LVR limits and pricing. Speak to a Lagos Financial broker about structuring investment bridging correctly.

What if I can’t sell within the bridging period?

Contact your lender immediately if the sale is delayed. Many lenders will extend the bridging period (at a fee and sometimes at a higher rate) if you can demonstrate the property is actively marketed. In a worst case, the lender may require you to sell at auction to close the facility.

Get Expert Advice from Lagos Financial

With close to 20 years of experience and access to 60+ lenders, Victor Lagos and the Lagos Financial team can help you find the right loan for your situation. Book a free assessment or call us to discuss your options.

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About the Author
Victor Lagos is a licensed mortgage broker (ACL 546774) and founder of Lagos Financial, with close to 20 years of finance industry experience since beginning his career at Bluestone Mortgages in 2006. A member of the Finance Brokers Association of Australia (FBAA) since 2015 and the Australian Financial Complaints Authority (AFCA — 98399), Victor helps Australians build wealth through tailored home loan and property investment strategies, working with 60+ lenders nationwide. Last reviewed: March 2026.

Bridging Loans | Buy Before You Sell