Bridging Loans Australia: How They Work, Costs & When to Use One (2026)

What is a bridging loan?

A bridging loan is a short-term mortgage that covers the gap between buying your new home and selling your old one. The lender holds both properties as security during the bridging period, and the loan unwinds when the old home sells.

Bridging exists because the property market doesn't synchronise to your moving date. You've found the new place, you don't want to lose it, but your current home hasn't sold (or the timing is awkward). The bridging loan lets you buy the new home now and worry about selling the old one over the next few months.

How bridging loans work

Mechanically, a bridging loan is structured as two facilities under one approval:

1. The bridging facility: Covers the new property's purchase price plus costs (stamp duty, conveyancing). Usually interest-only and interest-capitalised for the bridging period.
2. The end-debt loan: The mortgage you'll be left with once the old home sells and the proceeds pay down the bridging facility. This is the loan the lender will assess your serviceability against.

During the bridging period, the lender holds first mortgages over both properties. You complete the purchase on the new home, you can move in, and you have a defined window (usually 6 months) to sell the old one and discharge the bridging facility.

Peak debt and end debt

Two numbers matter more than any others in a bridging loan:

Peak debt

The maximum the lender owes you during bridging. Calculated as:

• Outstanding balance on your existing mortgage
• + Purchase price of the new property
• + Stamp duty and conveyancing on the new property
• + Capitalised bridging interest (typically 6 months')

Peak debt has to fit within the lender's loan-to-value ratio (LVR) cap on the combined value of both properties. Most lenders cap peak debt LVR at 75 to 80%. If your peak debt would exceed that, the bridging loan won't be approved.

End debt

What's left after your old home sells and the proceeds pay down the bridging facility. End debt = peak debt minus net sale proceeds (sale price less agent commission, marketing, conveyancing).

The lender will assess your ability to service the end debt, not peak debt, on your normal income. This is the loan you'll be paying off long-term once the move is done.

Worked example

You currently owe $400,000 on a home worth $1,100,000. You're buying a new home for $1,500,000. You expect to sell the existing home for $1,050,000 net of agent fees and marketing.

• New purchase + costs: $1,500,000 + $80,000 stamp duty + $5,000 conveyancing = $1,585,000
• Existing mortgage: $400,000
• Capitalised bridging interest (6 months @ 7.5%): ~$28,000
• Peak debt: $400,000 + $1,585,000 + $28,000 = $2,013,000
• Combined property value: $1,100,000 + $1,500,000 = $2,600,000
• Peak debt LVR: 77% (within 80% cap, OK)
• End debt after sale: $2,013,000 − $1,050,000 = $963,000

The lender's serviceability test is on the $963,000 end debt at standard rates, not the $2,013,000 peak. If your income can service $963K comfortably, the bridging loan is on the table.

Interest rates and capitalisation

Bridging interest sits roughly 0.5 to 1.5 percentage points above standard variable rates, depending on the lender, the bridging period, and your loan size. As of mid-2026, that puts most bridging rates in the 7.0 to 8.5% range.

Most bridging loans capitalise interest: you don't make monthly repayments during the bridging period. Each month's interest is added to peak debt and paid down when the old home sells. This protects cash flow during the move (you're not paying two mortgages), but it increases total interest cost because you're paying interest on interest.

Some lenders let you service the bridging interest monthly if you prefer. The trade-off is cash flow vs total cost. If you can comfortably afford to service both loans, monthly servicing is cheaper. If not, capitalising the interest is the safer choice.

True cost of bridging

The headline rate isn't the full picture. Real costs include:

• Capitalised interest on peak debt for the bridging period
• Application/establishment fee: $500 to $2,000
• Two valuations (one on each property): $300 to $800 each, usually paid by you
• Discharge fee on the bridging facility when it unwinds: $200 to $400
• Double holding costs: council rates, insurance, possibly utilities on both properties for the bridging period
• Selling costs on the old home: agent commission (1.5 to 3%), marketing ($3K to $8K), conveyancing ($1K to $2K)

On a $500K bridging amount over 6 months at a 1pp rate margin, you're looking at roughly $2,500 of capitalised interest plus $1,000 to $3,000 of fees and double-holding costs. Total bridging-specific cost: $3,500 to $5,500 versus selling first.

And don’t forget the second-biggest cost on the new purchase — stamp duty:

Will a lender approve me?

To qualify for a bridging loan, lenders typically require:

• Meaningful equity in the existing property (often 20%+ after the new purchase) so peak debt fits within LVR caps
• Serviceability on end debt at the lender's assessment rate (usually 3pp above the actual rate)
• A credible sale plan: the old home listed (or contracted to be listed within 30 days), priced realistically, with a competent agent engaged
• Clean credit history on both the borrower and the existing mortgage
• Stable income, lenders are conservative on bridging because the recovery position depends on a clean sale

Bridging is harder to get than a standard mortgage. A broker who regularly arranges bridging loans (not all do) will know which lenders are currently writing them and at what terms.

Bridging period and what happens after

• Standard bridging period: 6 months for established home, up to 12 months for new construction
• Extension: Typically 1 to 3 months at a higher rate, often with a requirement to drop the asking price
• End of bridging: If the old home still hasn't sold, the lender can force a sale to recover their position

Practical mitigation: list the old home before settlement on the new one. Set a realistic price (use a recent appraisal, not optimism). Accept a slightly lower offer rather than letting the bridging period blow out, the rate margin and fees on an extension typically cost more than the price difference.

Alternatives to bridging

Bridging is the most expensive of the three main options for moving home. The other two:

Sell first, then buy

Sell your existing home first, settle, and use the proceeds (plus a new mortgage) to buy the next one. You'll typically need short-term accommodation (rental, family) between settlements. Cleanest financially, but stressful if the market is moving fast and you can't find the right next home.

Buy first with a subject-to-sale offer

Make a conditional offer on the new home, conditional on the sale of your existing one within a defined window (often 60 to 90 days). The seller can usually still receive other offers and you have right of first refusal. Common for private treaty sales, almost never accepted at auction or in a hot market.

Comparing the three

Read our Sell First or Buy First guide for the full decision tree before committing to bridging.

Putting it together

When bridging is the right call

Bridging usually wins on the numbers when:

• The market is moving fast and the new property won't wait for a subject-to-sale offer
• You have meaningful equity in the existing home and can comfortably service the end debt
• The cost of double moves and short-term rental approaches or exceeds the bridging cost
• You're emotionally committed to the new home and the cost of losing it would be high
• You're confident your old home will sell within the bridging period (good agent, realistic price, prepped property)

Bridging tends to be the wrong call when:

• Your equity is thin and peak debt would push LVR above lender caps
• The market is soft and recent comparable sales are taking 4+ months
• You don't have a credible sale plan or a strong selling agent
• End-debt serviceability is tight, you'd be stretching to make the long-term mortgage work

The bridging loan process

1. Get an appraisal on your existing home from a local agent who actually sells in the area. Use it as the basis for peak-debt calculations.
2. Talk to a broker who regularly arranges bridging loans, not all do. Ask which lenders are currently writing bridging and at what terms.
3. Get pre-approval for the bridging facility before you sign a contract on the new home, especially at auction.
4. Engage your selling agent and prep the old home for sale. Time it so the property is on market by settlement of the new one (or shortly after).
5. Settle the new property using the bridging facility. Move in.
6. Sell the old home within the bridging period.
7. Settle the sale, the proceeds pay down the bridging facility automatically. You're left with the end-debt loan you've been assessed for.