Bridging Finance in Australia: Your Complete Guide to Buying Before You Sell

Found your dream home but haven't sold your current place yet? You're not alone. In Australia's competitive property market, timing the sale of your existing home with the purchase of your new one can feel like trying to solve a Rubik's cube blindfolded.

Navigating moving from property to property can be complex, so let’s dive into everything you need to know about your options when it comes to finance.

Really, there are two ways to tackle a move:

-          Buying a new property before you sell your current property

-          Selling your current property, then purchasing a new property

Now, in an ideal world, it would be great to have your new property secured, then take your time to sell your current property, but it’s not always possible, so let’s break down how they both work and what to look out for.

Let’s firstly start with buying a new home before you sell your current property, which is where bridging finance comes in.

What Is Bridging Finance?

Think of bridging finance as a temporary financial bridge that connects two points: where you are now (owning your current home) and where you want to be (owning your new home). It's a short-term loan that lets you buy a new property before you've sold your existing one.

The amount of bridging finance will depend on your equity available in your existing home, the purchase price and costs of the new home, less any deposit or contribution you’re able to make.

Bridging loan interest rates typically start from rates similar to a typical home loan, but they can spike after a short period of time. Depending on the borrower's profile, they may be more accessible than many people realise.

Common Terms

Here are some common terms you’ll hear when discussing Bridging Finance and what they mean:

• LVR – Loan to Value Ratio – this refers to the percentage of debt you’re holding against the asset

• Closed Bridge – this is when you have a contract of sale for both a new purchase, and the sale of your current home, and there is a defined period of time between the two properties where you need to hold bridging finance

• Open Bridge – this is when you have a contract of sale for the new purchase, but have yet to sell your current home

• Exit Strategy – this is the plan of attack in reducing or eliminating your debt (generally the sale of one of the properties)

• Costs – the ‘costs’ associated with buying a property including (but not limited to) Stamp Duty, Transfer Fees, Solicitors Costs etc.
  

Who Can Get Bridging Finance?

Equity Requirements

High level of equity in your current home is essential. Typically the restrictions we are looking at are:

• Maximum debt of 80% held against the total value of the assets held as security

• Ability to repay the end debt once a conservative sale figure is factored into your current home, and proceeds are used to reduce your debt levels.

Other Requirements

Lenders typically look for:

• Stable income and employment

• Ability to service interest payments during the bridging period

• A clear plan for selling your existing property

• High likelihood that your current property will be sold during the bridging loan term
  

How much Bridging Finance do I need?

So this is where it can get really tricky. Let’s look at a couple of scenarios on Upsizing, downsizing, high equity and low equity to see maximum bridging available, and what (if any) savings contribution you’d need to make.

Something else we will factor in here is an interest buffer for 12 months (which is what a lot of lenders will use for an open bridge scenario). On the scenarios below I’m just using a figure of 6.00% but note this may vary.

Scenario 1: Upsizing – Low Equity

This is probably the most common scenario we encounter.

Important again to note, we can only lend a maximum of 80% against the combined asset values, so for you to secure the property you'd need to contribute $332,017.20.

Scenario 2: Upsizing – High Equity

So we can see now we have a lot of equity available, you’d be able to completely fund the new purchase, along with costs, and still have an equity buffer of around $43,000.00.

Scenario 3: Downsizing – Low Equity

So while you’d be purchasing a considerably lower value property, the peak lending still moved above an 80% LVR, meaning a contribution would be required.

Scenario 4: Downsizing – High Equity

Again in this scenario, the whole purchase can be funded by equity which exists in the current property.

Types of Bridging Loans Available in Australia

Closed Bridging Loans

A closed bridging loan is when you already have a sale contract on your current property with a confirmed settlement date. A closed bridging loan has to be repaid by a specific date, making it the more predictable option with typically lower interest rates.

Open Bridging Loans

An open bridging loan is when you haven't sold your current property yet but don't want to miss out on your dream home. An open bridging loan normally has a term of 6-12 months without having a predetermined settlement date.

Note

In my experience, the vast majority of bridging loans are treated as Open Bridging scenarios. There are some instances where we refer to Closed Bridging, but often bank policy is developed around giving people 12 months runway to sell their existing home.

If you’re reading through an article and they are referring to Open and Closed bridges as two different worlds, but the predominant style of bridging now is Open bridging. Closed bridging scenarios can be considered by banks, generally majors banks, and they may offer more favourable credit terms, but they are strictly on a case by case basis, not a widely advertised policy or product.

For example, if you have a closed bridge scenario, and the maximum loan ratio dips above 80% LVR for a few weeks, there is a chance the bank would consider waiving the Lenders Mortgage Insurance. Important to note these kinds of flexible policies are generally tailored towards existing clients with favourable financial positions as often a bank will make a net loss on funding a closed bridge loan.

How Does Bridging Finance Actually Work?

Here's the simple breakdown:

1.       Understanding what’s possible – Before you hit the property listing websites, it’s best to speak to someone (broker) about realistically what’s going to be possible. As part of this process, generally you’d get a valuation done on your current home so equity levels could be checked, and you know exactly what kind of contribution you’d need prior to committing to any new purchase.

2. You apply for a Conditional Loan Approval – Once you know what you’re looking for in terms of purchase price and loan, you’d then apply for a Conditional Loan Approval, giving you confidence that finance is secured prior to committing.

3. You buy your new home - Using the bridging finance to complete the purchase

4. You sell your current home - Usually within 6-12 months

5. You pay off the bridging loan - Using the proceeds from your sale

6. You're left with a standard home loan - On your new property

During the bridging period, you generally have the flexibility to close out the loan quickly if you sell your home faster than expected (saving you interest).

What Are Current Bridging Loan Rates in 2025?

At the time of publication, a good interest rate in Australia is around 6% p.a., while bridging loan rates sit anywhere from 6.50% p.a. to 10% p.a. However, the good news is that some lenders may only offer bridging loans to existing customers, but this also means if you're with the right lender, you might get better rates.

The rates you'll actually get depend on several factors:

• Your loan-to-value ratio (LVR)

• Your credit history / conduct with your existing lender

• Amount of lending required

• End level of debt (banks will generally prefer there is a loan at the end of the transaction for them so they can make some ongoing revenue).

• The lender's assessment of your overall risk level

Pros and Cons of Bridging Finance

The Benefits

• Buy before you sell - Secure your next home without waiting for your current property to sell

• Avoid rental costs - Can save you money by meaning you don't need to rent a property or pay storage fees while you find a new home

• Flexible repayments - Flexible options to keep repayments manageable while you have a high 'peak debt' (e.g. interest-only payments)

• Up to 12 months - Maximum terms of up to 12 months with most lenders gives you a decent window of time to sell your home

The Drawbacks

• Higher interest rates - More expensive compared to standard home loan rates

• Risk of cost blowout - If your property doesn't sell quickly, interest keeps accumulating

• Pressure to sell - Risk of cost blowout: If you don't sell your home in the required time, you could be left with a large interest bill

• Valuation costs - Bridging finance may require two property valuations (your existing property and the new property), which could mean two sets of valuation fees

• Limited lender options - Not all banks offer bridging loans

Alternatives to Bridging Finance

If bridging finance doesn't sound right for you, or you physically don’t have access to the deposit or contribution required, you have a couple of options available.

1. Buy then Sell – Simultaneous Settlement

Rather than accept a settlement period of 30 days, ask for the longest settlement possible (90 days +). This gives you more time to sell your current home, and potentially settle both properties on the same day.

Really important to note the risk associated with this method. If you buy, you are then committed towards the new purchase. You may have to sell your current home in a rush, and accept a lower sale price, just to meet settlement in time. In a worst case scenario, if you can’t sell your current home, you risk losing your deposit on the new purchase if you can’t settle in time.

2. Sell then Buy – Simultaneous Settlement / Gap between Settlement

Similar to the first option, you can sell and secure a long settlement period. You then have a window to purchase your new home and try to settle them at the same time, or the new purchase after the sale.

The risk is if you can’t find a new home, then you may need to look at a rental, or stay with family / friends until you can secure a new home.

3. Subject to Sale Contracts

Adding a clause to your purchase contract that says "subject to sale", meaning if you don't sell your old home, you don't proceed with your purchase.

Is Bridging Finance Right for You?

Bridging finance works best if you:

• Have substantial equity in your current home (30%+)

• Have stable income and employment

• Are confident your property will sell within 6-12 months

• Want to avoid the hassle of temporary accommodation

• Are buying in a competitive market where you need to act fast

It might not be suitable if you:

• Have limited equity in your current home

• Are concerned about managing higher interest rates

• Have an irregular income

• Are buying in a slow-moving property market

Common Bridging Finance Mistakes to Avoid

1. Overestimating Your Property Value

Be realistic about what your current home will sell for. If your property sells for less than you expect, you could also be left with a larger ongoing loan amount.

2. Underestimating Selling Time

Properties can take longer to sell than expected. Houses in Bondi (NSW) take on average 43 days to sell, but your property might take longer.

3. Not Having a Backup Plan

It could pay to have a back-up plan in case your property doesn't sell within the expected timeframe.

The Bottom Line

Bridging finance can be a powerful tool for navigating Australia's property market, especially in competitive areas where good properties sell quickly. However, it's not a decision to take lightly.

The key is having sufficient equity, stable finances, and realistic expectations about how long your current property will take to sell.

Before making any decisions, it's crucial to speak with a qualified finance expert who can assess your specific situation and explore all your options. They can help you compare lenders, understand the true costs involved, and determine whether bridging finance aligns with your financial goals.

Disclaimer: This information is general in nature and doesn't constitute personal financial advice. Always consult with qualified professionals before implementing any financial strategy.