Bridging loans: buying the next home before the first one sells

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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The usual order is to sell, then buy. Homes do not always come up in that order. An owner in Toowoomba or on the Sunshine Coast finds the right house in the right street while the current one is not yet on the market, and the seller will not wait three months for it to sell. For a while, that owner would hold two homes and only one income.

Bridging finance is the product lenders built for that gap. It is short, it is priced differently from an ordinary home loan, and its risk sits almost entirely in one question: when the first home sells, and for how much. This guide explains how the loan is put together, what named lenders publish about its terms, how the interest accumulates, what the lender checks, what happens when the sale runs late or low, and the other ways of crossing the same gap. It describes general rules. Each lender's policy differs and each household's position is its own, so none of it is advice.

Lender product pages and the Commonwealth Bank fact sheet read on 9 October 2026; APRA release of 28 May 2026; Reserve Bank statement of 29 September 2026.

What a bridging loan is

A bridging loan is a short-term home loan that lets an owner pay for a new property before the sale money from the old one arrives. Moneysmart, the Australian Government's consumer finance site run by ASIC, defines bridging finance in its glossary as short-term finance that covers the period between buying a new property and selling the existing one. NAB's guide to the product describes it as a short-term loan that can help an owner buy a new property before selling the current one. Both properties are normally mortgaged to the same lender for the length of the bridge.

The structure varies. The Commonwealth Bank's bridging loan fact sheet, coded September 2025, describes one common design: the existing home loan becomes the bridging loan, and a second, ongoing loan is approved for the purchase. The borrower holds both at once. When the first home sells, the bridging loan is paid out and whatever is left over reduces the ongoing loan, which then generally reverts to principal and interest repayments. Other lenders write a single loan for the whole amount and reduce it at the sale.

Bridging is not offered on every loan type. The Commonwealth Bank limits it to its standard variable rate home and investment loans, and Adelaide Bank's product page says its bridging loan is available on a variable rate only. St.George, which calls its product a relocation loan, restricts it to owner-occupiers buying a home or buying land to build on.

Peak debt and end debt

Two terms carry the whole subject. NAB's guide explains both.

Peak debt is the most the borrower owes while holding both properties: the remaining mortgage on the current home plus the funds borrowed for the purchase. End debt is what remains after the sale proceeds have been applied, and it becomes the ongoing home loan.

NAB gives a plain example. A new home costs $800,000, the current home is expected to sell for $600,000 and still carries a $250,000 mortgage. Peak debt is $1,050,000. After the sale, end debt is $450,000. NAB notes that its example leaves out interest, fees and moving costs, which is the part a real borrower cannot leave out. Purchase costs such as transfer duty and legal fees are often added to peak debt when the borrower has no cash to pay them, and St.George says upfront costs can be included where the equity in the current home is sufficient. Selling costs come off the proceeds before they reach the loan. Interest sits in between, and how it is treated is covered below.

End debt is the number that decides whether the move is affordable in the long run. Peak debt is the number that decides whether the lender will allow it at all.

Closed and open bridging

The industry separates two situations, and the mortgage broker Aussie sets out the distinction in a guide published in March 2025.

A closed bridging loan is used when the owner has already signed a contract to sell the existing home and its settlement date is known. The gap has a fixed length and the sale price is settled, so lenders treat it as the lower risk.

An open bridging loan is used when the existing home has not sold and no settlement date exists. The owner is relying on an estimate of price and of time. Lenders respond by setting a maximum bridging period.

The difference shows up in the lender's assessment. Adelaide Bank's page states that it calculates loan servicing on the end debt only where an unconditional contract of sale is held. A Queensland seller whose buyer is still inside a finance or building and pest condition does not yet hold that. Until the contract is unconditional, the sale is an expectation, and the lender prices and tests the loan accordingly.

How long the bridge can last

No law sets the length of a bridging period. Each lender sets its own, and several publish it. The terms below were read on the lenders' own pages on 9 October 2026 and can change without notice.

The spread, six months at some lenders and twelve at others, matters more than it looks. A home that takes ten weeks to find a buyer and then has a 60-day settlement has used most of a six-month bridge. The longer period for construction reflects the time a builder needs before the owner can move and sell.

Extensions are not a right. ANZ's page says the term generally cannot be extended beyond 12 months. St.George says the loan generally needs to be paid off in 12 months and that an extension may be subject to its credit criteria.

How the interest builds

There are two ways to deal with interest during the bridge, and the lender's product usually decides which applies.

Under the first, the borrower pays interest only each month on the bridging loan, on top of the repayments on the ongoing loan. The Commonwealth Bank's fact sheet says interest is calculated daily and charged monthly, and that the borrower may be paying interest on two loans at once. ANZ's page describes interest only repayments at its standard variable rate. This approach needs spare monthly income or savings, and it keeps the debt from growing.

Under the second, no repayments are made at all. The interest is capitalised, meaning it is added to the loan balance each month. St.George, Adelaide Bank and Great Southern Bank describe their products this way. Adelaide Bank spells out the consequence: because interest is added to the balance, the borrower pays interest on that interest. Capitalising makes the months of overlap easier to live through and makes the end debt larger. A borrower who can afford to pay something during the bridge reduces the final figure, and St.George and Adelaide Bank both allow extra repayments, though neither offers redraw on the bridging loan.

The rate is often higher than on an ordinary home loan. St.George's page showed a variable rate of 8.55 per cent a year for its relocation loan when read on 9 October 2026, with a comparison rate of 8.36 per cent, for owner-occupiers borrowing 70 per cent or less of the property value. The Commonwealth Bank and ANZ apply their standard variable rates and publish no separate bridging rate. All of these move with the market. The Reserve Bank lifted the cash rate target by 25 basis points to 4.60 per cent in its statement of 29 September 2026, the fourth increase of the year, and a variable bridging rate follows such changes while the bridge is open.

What the lender checks

A bridging application is assessed more closely than an ordinary one, because the lender is exposed to two properties and one uncertain sale.

Equity comes first. The published limits in the table above range from 70 to 80 per cent, and they are measured in different ways: ANZ against the value of the new home, Great Southern Bank across both loans and both properties. NAB's guide says loan amounts are typically capped at a percentage of the combined property value, often 80 per cent. An owner with a small mortgage on a valuable home passes this test easily. An owner who bought recently with a small deposit may not.

Then comes the value of the unsold home. The lender does not take the owner's hoped-for price, or the agent's. It orders its own valuation of both properties, and Aussie's guide notes that lenders tend to assess the expected sale price conservatively. If the lender's figure for the current home is lower than the owner's, the projected end debt rises and the borrowing room shrinks. How a bank valuation is prepared, and what can be done about a low one, is covered in this magazine's guide to valuations that come in under the contract price.

Serviceability is the third test, and practice differs. ANZ says a borrower must be able to meet repayments on both the ongoing loan and the bridging loan, and may need savings to cover the bridging period. Adelaide Bank and Great Southern Bank say much the same about holding both loans. Adelaide Bank will assess on end debt alone only with an unconditional sale contract in hand. The ordinary rules of borrowing capacity still apply to whatever debt is tested: APRA confirmed on 28 May 2026 that the mortgage serviceability buffer stays at 3 percentage points, so banks test repayments at a rate well above the one actually charged. APRA also left unchanged its cap on high debt-to-income lending, under which a bank may write up to 20 per cent of its new home loans at six times income or more. APRA's announcement of that cap on 27 November 2025 said it excludes bridging loans for owner-occupiers.

Finally the lender wants an exit. NAB describes this as a defined plan to repay, usually the sale of the current home. Great Southern Bank's target market determination says the product is not suitable for customers who do not intend to sell the existing property to repay the loan.

A worked example

The figures below are illustrative. They are not market data and not a quote from any lender. The assumptions are these.

A Queensland couple owns a home they expect to sell for $850,000, with $300,000 still owing on it. They buy a home for $1.1 million. They have no spare cash, so the whole price and $50,000 of purchase costs are borrowed. That $50,000 is a round figure standing in for transfer duty and legal fees, not a duty calculation. The bridging rate is assumed to be 8 per cent a year on the entire peak debt, capitalised monthly, with no repayments made. Selling costs, covering commission, marketing and legal fees, are assumed to be $25,000.

Peak debt on the day the purchase settles is $300,000 plus $1.1 million plus $50,000, which is $1,450,000. The two homes together are worth $1,950,000 on the couple's own figures, so the debt is 74.4 per cent of the combined value. The first month's interest is about $9,667.

Ignoring interest, the couple's end debt would have been $625,000. Six months of capitalised interest lifts it to $683,975. Four more months and a price $50,000 lower lift it to $774,619, which is $90,644 more than the first outcome. The ongoing loan the couple must then service for decades is the one in the last row, so a careful budget tests the final column, not the first.

If the home sells late or for less

The two risks are separate, and they compound.

A lower price leaves a larger end debt. NAB's guide warns of a possible shortfall if the home sells for less than expected, and Adelaide Bank's page says the same of a higher loan balance than anticipated. If the higher end debt is more than the borrower can service, the remaining loan itself becomes the problem.

A later sale adds interest every month, and at the end of the bridging period the terms change. Adelaide Bank says that once the period ends, the borrower will be required to make repayments on both the existing home loan and the new one. Aussie's guide says lenders may move the debt to a standard loan structure and reassess servicing against the full balance.

The fact sheet illustrates the point with two scenarios. In one, a property sells for $400,000 after eight months, repays a $300,000 bridging loan and reduces the ongoing loan by $100,000. In the other, it is still unsold after twelve months and is then sold with the bank's assistance for $280,000, and the $20,000 shortfall lifts the ongoing loan from $600,000 to $620,000. The fact sheet states plainly that a borrower may lose the property and still owe money.

A sale contract that falls over has the same effect as a late sale. A Queensland contract that is still subject to the buyer's finance can end without a sale, and the bridge keeps running while the home goes back on the market.

What it costs

Interest is the largest cost, and the worked example shows its scale. The others are smaller and easier to overlook.

Lender fees are published by some institutions. St.George lists a $600 lending establishment fee, an $8 monthly loan account fee, a $100 document processing fee and a $350 loan discharge fee for its relocation loan. NAB's guide lists the kinds of fee that may apply at any lender: valuation fees on one or both properties, legal and settlement costs, and loan set-up or variation fees. The Commonwealth Bank refers borrowers to its general fees and charges brochure.

Then there is the cost of owning two homes. NAB's list covers council rates, insurance, utilities and, for a unit, body corporate levies on both properties, along with moving costs.

Some features are switched off during the bridge. Adelaide Bank and St.George say redraw is not available. Aussie's guide notes that some bridging products limit offset accounts as well.

The other ways across the gap

Bridging finance is one of several ways to buy before the sale money exists. Each moves the risk to a different place.

A subject-to-sale condition makes the purchase depend on the sale of the buyer's current home. No second loan is needed and the buyer cannot be left holding two properties. Aussie's guide notes the weakness: sellers may refuse the condition in a competitive market. How the condition is drafted in a Queensland contract is the subject of an earlier guide here.

A long settlement on the purchase, or two contracts timed to settle on the same day, uses time in place of debt. ANZ's own page suggests a same-day settlement for borrowers whom bridging does not suit. This magazine's guide to simultaneous settlement covers how the two contracts are lined up and what happens when one of them slips.

Selling first and renting removes the price risk entirely: the owner knows the exact sale figure before committing to a purchase. NAB observes that people often sell first, then buy. The cost is two moves, rent, storage and the chance that prices shift while the household is out of the market, in either direction.

A deposit bond deals with a narrower problem. It is a guarantee, issued for a fee, that the deposit will be paid at settlement, used when the buyer's cash is tied up in the home being sold. It replaces the deposit, not the purchase price, so the buyer still needs the sale proceeds or a loan by settlement day, and the seller has to agree to accept a bond in place of cash.

Credit law protections and hardship

A bridging loan to an individual for a home is consumer credit, so the National Consumer Credit Protection Act 2009 applies to it as it does to any home loan.

Chapter 3 of that Act holds the responsible lending obligations. ASIC's summary, updated on 6 August 2026, sets them out. A credit licensee must not enter into, suggest or help a consumer apply for a credit contract that is unsuitable for the consumer. To reach that view, the lender or broker must make reasonable inquiries about the consumer's financial situation, requirements and objectives, take reasonable steps to verify the financial situation, and make an assessment of whether the contract is not unsuitable. A broker makes a preliminary assessment and the lender a final one. ASIC adds that a consumer who asks must be given a written copy of that assessment. ASIC's detailed guidance on these duties is Regulatory Guide 209, issued on 9 December 2019.

Hardship rules apply too. Moneysmart, in guidance last updated on 2 October 2026, says a borrower who is struggling can ask the lender's hardship officer to change the repayments, explaining why, for how long and how much can be afforded. The lender must reply in writing within 21 days. If it asks for more information, it has 21 days from when that information is provided. A lender that refuses must give a reason, and the borrower can then use the lender's internal dispute process and after that the Australian Financial Complaints Authority, which is free. Moneysmart also points to free financial counselling through the National Debt Helpline on 1800 007 007, and says the earlier help is sought, the more options remain.

One part of Moneysmart's guidance fits a stalled bridge closely. Where the position is unlikely to improve, it says selling a home yourself may be better than leaving the lender to repossess it, because the price is likely to be higher and the lender's legal costs are avoided. A bridging borrower is already selling. The useful step, well before the term runs out, is to tell the lender how the campaign is going. The full hardship process is set out in this magazine's guide to what a lender must do when repayments become too hard.

A bridging loan lends against a sale that has not happened yet. Every figure in it is firm except the two that matter most: the price and the date.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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