What is a Bridging Loan?

A bridging loan is a short-term loan that helps you “bridge the gap” between buying a new property and selling your existing one. It provides temporary finance to cover the purchase cost of the new property until the old property is sold and the proceeds can be used to repay part (or all) of the loan.

Typically, bridging loans are interest-only for a set period (usually six months to a year) and are expected to be repaid once your current property is sold.

How Does a Bridging Loan Work?

When you apply for a bridging loan, lenders usually calculate the “peak debt” — this includes:

  • The existing mortgage on your current property

  • Plus the purchase price (or balance owing) of the new property

  • Plus any additional costs (such as stamp duty and legal fees)

Once your existing property sells, the net sale proceeds are used to reduce the peak debt. The remaining amount becomes your end loan (your new regular mortgage).

During the bridging period, most lenders will allow you capitalise the overal interest until you sell your property – you can make interest only repayments during the bridge period if you choose to.

When Does a Bridging Loan Make Sense?

A bridging loan can be a smart move when:

  • You have found your next home but have not yet sold your current property
    Rather than risk losing your dream home, a bridging loan gives you the ability to buy now and sell later.

  • You need more time to sell your existing property
    If market conditions are slow, a bridging loan can buy you time to sell at a better price without panic.

  • You want to avoid renting temporarily
    Instead of moving twice (into a rental and then into your new home), bridging finance lets you move directly into your new property.

What to Consider Before Taking a Bridging Loan

Bridging loans can be very useful, but they are not right for everyone. Here are key things to consider:

  • Interest Costs
    Interest is generally charged on the full peak debt, even if part of the funds are not immediately drawn. Budget carefully, as the cost can add up quickly if your sale is delayed.

  • Repayment Timing
    Lenders expect your existing property to be sold within a set timeframe (usually six months for owner-occupiers and up to 12 months for investors).

  • Property Valuations
    Banks will base their assessment on conservative valuations. If your property sells for less than expected, you may be left with a larger loan than you planned for.

  • Servicing Requirements
    You still need to demonstrate that you can service the ongoing debt, even if interest payments are capitalised (added to the loan).

  • Exit Strategy
    Always have a clear exit plan — how and when you will repay the bridging loan.

Is a Bridging Loan Right for You?

Bridging finance can be a great solution if it is used strategically — but it requires careful planning.
At Simplify Finance, we work closely with clients to assess:

  • Their overall financial position

  • The expected sale price of their existing property

  • Their comfort level with short-term interest costs

Our goal is to help you secure your new home without unnecessary stress or financial strain.

Final Thoughts

In the right situation, a bridging loan can give you flexibility and confidence when transitioning between properties.
However, it is important to understand the structure, risks, and timelines before proceeding.

If you are considering buying before selling or simply want to know your options, speak to our team today. We can help you map out the best approach and ensure you are not left financially stretched during the transition.

Need help with bridging finance?

Book a free strategy call with Simplify Finance today — we will guide you through every step.

Contact Simplify Finance today to get started on your next property move — in Sydney or beyond.