Make your home transition smoother with bridging finance

After months of research, weekends spent attending inspections and auctions, finding the perfect home, at the right price brings a sense of relief and excitement. But what if you haven’t sold your current house yet?

Finding your next home before settling your existing property’s sale is a common predicament, with many using bridging finance as a convenient way to fund their crossover period.

Fortunately, most lenders now offer this type of finance and there are lots of options available. However, there are also some important things to consider before adding a bridging loan to your mortgage. Let’s go over the basics to help you decide if it could work for you.

Make your home transition smoother with bridging finance

Why use bridging finance?

Using a bridging loan can help ensure you don’t miss out on your new dream home or accept a lower offer as you rush the sale of your current one. And if you can buy before selling, it also means you won’t have to waste money renting while you look for your next home.

You can also use bridging finance to fund renovations to prepare your property for sale or to cover costs for things like moving and medical, legal or general living expenses. In all these cases, you must have a property already on the market and expected to sell within 6 to12 months.

How do bridging loans work?

Lenders have a range of ways they link bridging and home loans, but they are basically an advance on the sale of your existing home. Essentially, when you buy your next property, you start paying your bridging loan interest and new mortgage repayments.

We can discuss the setup of your finance with lenders to suit your circumstances. This may include deferring bridging interest payments until you settle the sale of your current home. It may also be possible to negotiate the same or different interest rates for your bridging and home loans depending on whether you want your ongoing mortgage to be a fixed or variable rate.

When deciding whether bridging finance will work for you, you may need to include paying your existing mortgage until the property is sold in your calculations.

Bridging loans can be either closed or open. If you have agreed a sale and settlement date, you can select a closed bridging loan that ends just after this date. If you haven’t found a buyer, an open bridging loan usually has a term of 6 or 12 months.

With both, it’s usual for a lender to ask for proof that your current property is already on the market. Many lenders charge a higher interest rate if you don’t sell your property by the agreed date, so it pays to ensure both sales go through within the agreed timeframe. And just like regular mortgages, they can also force the sale of your existing property if you fail to meet repayments.

Requirements for a bridging loan

Lenders vary in the types of properties they will lend against. Some won’t lend to companies or for strata titles, for example. They also often require higher owner equity in both the old and new homes. And like ordinary mortgages, the amount of equity you have will affect your interest rate.

It’s common, but not essential, to use the same lender for your bridging finance and new property mortgage. Lenders use a complicated formula to decide if you can afford to repay these combined loans. This is called your ‘peak debt’.

Say your new home loan is for $800,000 and your bridging loan is for $200,000. That means your peak debt is $1 million, plus interest for the duration of your bridging loan term. If you then pay $400,000 of equity from the sale of your old home into your loans, your ongoing balance reduces to $600,000. Which will be your mortgage amount going forward.

With rising interest rates and property price fluctuations, it’s more important than ever to get your changing home calculations right.

If you’d like to know more, please get in touch on 03 9553 0271 as soon as you’re thinking of selling. We can calculate what you can afford to buy and go through your lender and loan options to find a solution that works for you.


Important: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

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Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

  • Certified Financial PlannerTM Professional
  • Diploma of Financial Planning

At Choice Financial Advice we work with you along the way on life’s journey.

Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.