Guide · Loan basics
Bridging Finance Explained: How to Buy Before You Sell
You've found the next home but you haven't sold the current one. A bridging loan can let you buy first and sell after, so you don't miss out. It's a genuinely useful tool, but it needs to be used with your eyes open. Here's how it works.
A bridging loan is short-term finance that covers the gap between buying your new home and selling your old one. For a period, usually 6 to 12 months, you effectively hold both properties, and the lender funds the overlap. Once your old place sells, the sale proceeds pay down a big chunk of the debt and you're left with an ordinary home loan on the new property. The two words you need to know are peak debt and end debt.
Peak debt and end debt
Peak debt is the total you owe while you hold both properties: your existing loan plus the new purchase and its costs. End debt is what's left after your old home sells and the net proceeds are applied. That end debt becomes your regular home loan going forward. Lenders care most about the end debt, because that's the loan you have to service long term, but they'll also want to be comfortable that the sale will realistically clear the peak.
| Item | Amount |
|---|---|
| Loan on current home | $300,000 |
| Loan needed for new home | $500,000 |
| Peak debt (both held) | $800,000 |
| Net proceeds from selling current home | $350,000 |
| End debt (ongoing loan) | $450,000 |
How the interest usually works
During the bridging period many lenders capitalise the interest, which means instead of paying it in cash each month, it gets added to the loan balance. That eases the cash squeeze of carrying two properties at once, but it also means the debt grows until you sell, so a quick, clean sale really matters. Some bridging products are interest-only during the term instead. Which structure suits depends on your cash flow and how confident you are about the sale timeline.
The real risk: your old place doesn't sell
Bridging works beautifully when your sale goes to plan. The danger is a slow or soft sale. If it drags on, capitalised interest keeps building and you may be forced to accept a lower price to clear the peak debt. Have a realistic, and ideally conservative, view of what your current home will sell for and how long it'll take before you commit.
Is bridging right for you?
- You've found a home you don't want to lose and selling first isn't practical.
- You have solid equity in your current property, so the end debt is comfortable.
- You're realistic about your sale price and timeframe, not hopeful.
- You can cope if the sale takes a little longer than you'd like.
The alternative is selling first and either renting for a bit or negotiating a long settlement, which avoids the double holding cost but risks missing the home you want. There's no universally right answer, it depends on your equity, the market you're selling into, and your appetite for risk. This is exactly the kind of thing worth talking through before you commit to a purchase. See how I work as your mortgage broker, and if the plan involves upgrading, the refinancing page is useful too.
Thinking about buying before you sell?
Send me your rough numbers and I'll sanity-check the peak and end debt before you go firm on anything.
Frequently asked questions
How long does a bridging loan last?
Usually 6 to 12 months, depending on the lender and whether you're buying an established home or building. The idea is to give you enough time to sell your existing property in an orderly way. If the sale drags well beyond the term, it can become expensive, so a realistic sale timeframe is important going in.
Do I make repayments on a bridging loan?
It depends on the product. Many bridging loans capitalise the interest during the bridging period, so it's added to the balance rather than paid in cash, which eases the strain of holding two properties. Others are interest-only for the term. Either way, the debt is cleared down to your end debt once your existing home sells.
What happens if my house sells for less than expected?
You'd have less to put towards the peak debt, so your end debt would be higher than planned, and you'd need the income to service that larger ongoing loan. That's why lenders and I both want a conservative view of your likely sale price up front, and why bridging suits people with solid equity and a realistic sale expectation.
Important information
This information is general in nature and does not take your personal objectives, financial situation, or needs into account. It is not credit assistance or a recommendation to enter into any particular credit contract. Consider whether it is right for you and seek advice before acting. Lending is subject to a lender's eligibility and approval criteria. Terms, conditions, fees, and charges apply.
Greenwood Finance · ABN 23 671 049 693 · Credit Representative No. 551942.
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