Bridging Loans: Buying Before You Sell

If you’ve found your dream home but haven’t yet sold your current property, a bridging loan can fill the financing gap. According to Aussie’s guide, a bridging loan is a short‑term, interest‑only facility that typically lasts 6–12 months. It helps you complete the purchase of your new home while giving you time to sell the old one.

How bridging loans work

• The lender calculates your peak debt: the sum of your current mortgage plus the purchase price of the new property (less your deposit). During the bridging period you usually pay interest only on both loans.

• When you sell your existing home, the sale proceeds reduce the debt to the end debt, which becomes your new ongoing mortgage.

  
  

Closed vs open bridging loans

• Closed bridging loans are for borrowers who have already exchanged contracts on the sale of their existing property. Because there’s a set settlement date, the interest rate may be lower.

• Open bridging loans are for borrowers who haven’t yet sold. They can last up to 12 months and often carry higher rates.

  
  

Considerations

• Interest cost:  You’re effectively servicing two loans during the bridging period. If your property takes longer to sell, you may incur additional interest.

• Sale deadline:  Most lenders require you to sell your existing property within the bridging period. Failing to do so may mean refinancing at higher rates.

• Broker guidance:  Bridging loans are complex. Brokers calculate your peak debt, advise on structuring repayments and help you weigh the risks.