Bridging Finance: Buying Before You Sell
ADS Team
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August 3, 2026
about 1 month ago
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In short: Bridging finance covers the gap between buying your next home and selling your current one. The lender funds both properties temporarily, and the number that matters is peak debt - the total owed at the worst moment, including capitalised interest - and whether your sale clears it.
Key takeaways
- Peak debt is existing debt plus the new purchase plus costs plus capitalised interest.
- Interest is usually capitalised, so the debt grows while you hold both properties.
- End debt is what remains after the sale, and it must be serviceable as a normal loan.
- A sale below expectations increases end debt dollar for dollar.
How peak debt builds
Selling a $900,000 home with $350,000 owing, buying at $1,200,000 with $55,000 of costs, bridging for six months at 8.5%:
| Component | Amount |
|---|---|
| Existing debt | $350,000 |
| New purchase + costs | $1,255,000 |
| Opening bridging debt | $1,605,000 |
| Capitalised interest, 6 months | $68,200 |
| Peak debt | $1,673,200 |
| Less net sale proceeds (after 2.5% costs) | $877,500 |
| End debt | $795,700 |
Closed vs open bridging
- Closed bridging - you have an unconditional contract on your existing property with a known settlement date. Cheaper, easier to approve, far lower risk.
- Open bridging - you have not sold yet. More expensive, shorter maximum terms, and lenders cap peak debt LVR more tightly, commonly 75-80% of combined value.
The difference in risk is enormous. Open bridging in a slow market is where people get hurt.
Stress-test before you commit
Model three scenarios, not one:
- Sells on time at the expected price - your base case.
- Takes three months longer - on the example above that adds roughly $34,000 of interest.
- Sells 10% below expectation - $90,000 straight onto end debt.
If scenario three leaves an end debt you cannot service, the plan is too tight. Reduce the purchase price, sell first, or negotiate a longer settlement instead.
Frequently asked questions
How long can bridging finance run?
Commonly six months for an unsold property and up to twelve where a sale is contracted. Beyond the term, penalty rates usually apply.
Do I make repayments during the bridging period?
Often not - interest is capitalised onto the balance. That keeps cash flow manageable but means peak debt grows every month you hold both properties.
What if my property does not sell at all?
The facility expires and the lender can require sale. This is the core risk of open bridging, and it is why lenders cap peak debt LVR and why a realistic price matters more than an optimistic one.
Related reading
- Construction Loans: How Progress Payments Work
- Refinancing Your Home Loan: The Complete 2026 Process
- Mortgage Prisoners: When You Cannot Refinance
Sources
- Bridging loans — ASIC Moneysmart
- Housing lending rates, statistical table F6 — Reserve Bank of Australia
Rates checked as at 2 September 2026. Interest rates, lender policies and government schemes change frequently. Figures in this article are illustrative and were accurate at the date shown.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
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