Bridging Finance

Peak debt is the total amount you owe during the bridging period — the balance still outstanding on your existing home plus the full new purchase price, fees and capitalised interest, before the old property has sold. It is the highest exposure you carry at any point, and the lender assesses the whole figure, not just the end position. If peak debt sits too high against the combined value of both properties, the lender may decline, reduce the loan or require a larger contribution. We model peak debt first because it is the number that most often determines whether a bridge is viable at all.

This is the central risk of any bridge, and we put it in writing before you commit. If the existing property sells more slowly than planned, interest keeps capitalising and peak debt keeps growing — which can erode your equity and, in a closed bridge, breach the agreed sale deadline. If it sells for less than your estimate, the residual end debt is larger than modelled, and you must be able to service that higher loan from your own income. We stress-test both a slow sale and a lower sale price so you can see the worst-case holding cost rather than only the optimistic case.

A closed bridge applies when you have already exchanged contracts on the sale of your existing property, so the sale date and proceeds are known with reasonable certainty. Lenders generally treat closed bridges as lower risk and price them accordingly. An open bridge applies when the existing property is not yet sold or even listed, so the timing and sale price are unknown. Open bridges carry more risk, attract tighter lender policy, often require a lower loan-to-value ratio and a clear sale strategy. We confirm which type fits your situation before approaching any lender.

On many bridging facilities you do not make repayments on the bridging portion during the bridge — instead the interest is added to the loan balance each month, which is called capitalisation. This keeps your cash flow manageable while you hold two properties, but it also means the debt grows over the bridging period rather than staying flat. The longer the bridge runs, the more interest compounds onto peak debt. We show you the capitalised interest under both a quick sale and a delayed sale so the true cost of holding two properties is visible up front.

End debt is the loan that remains after your existing property sells and the net sale proceeds are applied against peak debt. It becomes an ordinary home loan that you service from your income going forward. Lenders assess end debt servicing the same way they assess any standard mortgage — income, expenses, the APRA serviceability buffer and your other commitments. A bridge can only be approved if you can comfortably service the end debt, because the bridge is a temporary structure and the end debt is the position you live with. We confirm end-debt servicing before recommending a bridge.

Bridging finance generally costs more than a standard home loan because it is a higher-risk, short-term structure. Expect a higher interest margin on the bridging portion, valuation fees on both properties, application and legal costs, and the compounding effect of capitalised interest over the bridge. It is not suitable for everyone — where the sale timing is uncertain, the equity buffer is thin, or the end debt is not comfortably serviceable, we say so in writing rather than push the structure. Eligibility, lender criteria, fees and charges apply, and any approval depends on the lender assessment.

Often, yes — and we scope them before recommending a bridge. Depending on your equity and income, alternatives can include a longer settlement on the purchase, a deposit bond, a simultaneous sale-and-purchase settlement, or selling first and renting briefly. Each has its own cost, risk and timing profile. A bridge suits buyers who have strong equity, a serviceable end-debt position and a clear sale plan but a genuine timing gap. Where a simpler structure achieves the same outcome with less risk, that is what we document.