Bridging loans, buying before you sell

What a bridging loan is

The Moneysmart glossary page (updated 1 October 2019) gives the one-line definition above. RateSonar did not find a longer official Moneysmart or ASIC guide to bridging loans on 2 November 2026, so the details below are general arithmetic and questions, not a description of any lender's product. Moneysmart's interest-only page (updated 29 October 2026) notes that interest-only loans may be useful for short-term borrowing such as bridging finance, with the usual warning that the repayment rises when the interest-only period ends.

Peak debt and end debt

These are the two numbers that matter. A worked example with round numbers, which are illustrative and not typical or current:

The arithmetic is $1,300,000 minus $700,000 of net sale price. The point to take away: the peak is far higher than the end, and the bridging period is the time between the two.

Use the interest figure to sense the carrying cost. At the middle variable rate, each $100,000 costs about $562 a month, or $6,740 a year, as at 2 Nov 2026. At the $1,300,000 peak in the example, that is 13 times the per-$100,000 figure, rate held constant, before any fees. If interest is capitalised, meaning added to the loan, you pay interest on interest. Ask whether it is, and what happens if the sale takes longer than planned.

Risks

• The sale takes longer or sells for less. The end debt rises. Ask what happens to the bridging period and its cost.
• Two sets of costs at once. Interest, council rates, insurance and possibly rent, on two properties.
• Serviceability. The lender must be satisfied that you can handle the peak debt. See how lenders assess serviceability.
• Rate changes. A rise lifts the cost on both loans. RateSonar's rate outlook is general context only.

Alternatives to ask about

None of these suits everyone, and eligibility depends on the lender:

• A longer settlement or a settlement on the new home that matches your sale. Talk to your conveyancer or solicitor.
• Selling first and renting. It removes the peak debt at the cost of moving twice.
• A guarantor. A family member's guarantee may change how much you can borrow. See guarantor home loans for the risks.
• Equity in your current home. Ask about drawing on it for the deposit. See using home equity and what is LVR.

What to ask your lender

1. What is the maximum bridging period, and what happens at the end?
2. Is interest charged monthly, or capitalised?
3. What are the fees, in writing, and do any recur?
4. What rate applies to the bridging part, and to the end debt?
5. What valuation or sale evidence do you need?
6. What if the sale falls through?

Compare the lending rates on the home loan rate board. Rates there are advertised standard rates, and a bridging structure may be priced differently.