Bridging Loan Guide Australia 2026
Bridging finance is the product Australian home upgraders use to buy their next home before their current one has sold. It is a short-term loan that runs for 6 to 12 months, capitalises interest until the sale completes, and converts to a standard mortgage when the proceeds clear. The mechanics are unfamiliar to most buyers because the structure is different from a normal home loan. This guide walks through how the product works, when it makes sense, and the maths over a typical timeline.
- Bridging finance funds your next home before your current one sells.
- Two flavours: closed (sale contract exchanged) and open (no sale contract yet); rates and eligibility differ materially.
- Most bridging products capitalise interest, so you make no monthly repayments during the bridging window.
- Peak debt is the temporary high; end debt is what remains on the new property after sale proceeds clear.
- Always go in with a realistic sale strategy and a fallback if the market softens.
Closed vs open bridging
The difference comes down to whether you have already exchanged contracts on the sale of your current home.
- Closed bridging: You have exchanged contracts on the sale of your current home and have a settlement date locked in. The lender knows when their bridging exposure ends. Rates are typically within 0.30 per cent of standard variable home loan rates. Most major banks offer this.
- Open bridging: Your current home has not yet sold. The lender carries the risk of how long the property takes to sell and at what price. Rates typically run 0.50 to 1.50 percentage points above standard variable. Fewer lenders offer it; non-bank specialists dominate the panel.
The peak debt and end debt structure
Bridging loans use a two-tier structure that lenders refer to as "peak debt" and "end debt".
Peak debt is the total amount you owe at the highest point: the existing mortgage on your current home, plus the new loan on the new home, plus capitalised interest, less any deposit. This is the lender\'s exposure during the bridging window.
End debt is what remains after your current home sells and the sale proceeds are applied to peak debt. End debt is the new home loan you continue paying after bridging finishes. The lender qualifies you for the loan based on your ability to service end debt, not peak debt; capitalised interest during bridging removes the cash-flow constraint of also servicing the peak.
A worked example
Current home: $850,000 expected sale price, $320,000 mortgage outstanding, $530,000 net equity
New home purchase: $1,150,000
Estimated stamp duty + costs: $52,000
Bridging window: 6 months at 6.85% capitalised
Peak debt at month 0: $320k existing + $1,150k new + $52k costs = $1,522,000
Capitalised interest over 6 months: about $52,100
Peak debt at sale settlement: about $1,574,100
Sale proceeds applied (assume $850k less $20k selling costs): $830,000
End debt on the new home: $744,100. The borrower\'s servicing assessment is run on end debt, not peak debt.
When bridging makes sense
- You have found the right next home and timing pressure is real: The new property will not wait for your sale to complete.
- Your current home is realistically saleable: Recent comparable sales support the expected sale price within the bridging window.
- You are upgrading: The end debt on the new property is at an LVR you can comfortably service.
- You have flexibility on the sale price: If the market softens, you can adjust price expectations rather than holding out indefinitely.
When bridging does not make sense
- You are stretched on end debt servicing: If the post-bridging loan is at the limit of your servicing capacity, you have no buffer for a soft market.
- The current home is hard to sell: Specialty properties, regional locations with thin liquidity, or properties needing material work all extend timelines unpredictably.
- You are buying in a falling market: Capitalised interest plus a price reduction at sale time can compound quickly. Consider sell-first instead.
- You can negotiate a long settlement: If the new vendor will accept 90 to 120 days, you may be able to settle both properties on the same day without bridging at all.
- Get a written sale-price estimate from at least two local agents on your current home
- Confirm whether the bridging is closed or open and the rate difference
- Model peak-debt interest cost over 6 and 12 months, not just the optimistic timeline
- Confirm what happens if the bridging period expires without sale (extension, refinance, forced sale)
- Have a fallback plan: long-settlement on the new property, or sell-first with rental in between
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees, or other loan amounts might result in a different comparison rate. Comparison rates are based on a secured loan of $30,000 over 5 years for vehicle finance and $50,000 over 5 years for equipment finance, as required under the National Credit Code.