Bridging Finance: How to Buy Before You Sell
Bridging finance funds the gap between buying your next property and settling the sale of your current one. How the structure works and how to size it safely.
The property you want is available now. The property that funds it sells later. Bridging finance covers that gap: a short-term facility secured by property, repaid when the sale settles.
The structure in plain terms
A bridging facility is usually secured over both the outgoing and incoming property, or over whichever asset carries the equity. Interest is commonly capitalised — added to the balance rather than paid monthly — so you are not servicing two properties out of cash flow while the sale campaign runs. When the outgoing property settles, the facility is repaid in full and any surplus returns to you.
That capitalisation is the feature that makes bridging usable. It is also why the term and the assumed sale price matter so much: both feed directly into the balance you owe at the end.
Sizing the loan properly
Work out four numbers before you talk to a lender:
- Peak debt — the incoming purchase price plus stamp duty and costs, plus any existing loan on the outgoing property.
- Combined security value — independent valuations, not agent appraisals.
- Expected net sale proceeds — after agent commission, marketing and legals, at a realistic price rather than a hopeful one.
- Time to settlement — campaign, cooling off and the settlement period itself, and then add a buffer.
If net proceeds comfortably clear the facility with room to spare at a conservative sale price, the bridge is sound. If it only works at the top of the agent estimate, reduce the loan or extend the term.
Where bridging earns its cost
- Buying before selling in a market where good stock does not wait.
- Auction and deposit funding, where an unconditional purchase needs cash within days.
- Investment purchases ahead of a planned disposal elsewhere in the portfolio.
- Settlement rescue, where a buyer of your property has failed to settle and your own purchase still must complete.
- Residual stock, where a developer needs to clear a construction facility while the last few units sell down.
Why private lenders bridge faster
Bank bridging exists, but it is usually assessed on your ability to service both loans simultaneously, which many borrowers cannot show on paper. A private lender assesses the security and the exit: is the outgoing property saleable, is the price realistic, is the timeframe honest. That is why a bridge can be conditionally approved in minutes and funded in days rather than weeks.
Managing the risk
The single risk in bridging is that the sale takes longer or lands lower than expected. Manage it deliberately:
- Set the term longer than your expected settlement date, then repay early — check that early repayment costs nothing.
- Price the outgoing property to sell rather than to test the market.
- Model the balance at expiry with capitalised interest included, at a 10 per cent lower sale price.
- Agree the extension mechanism up front, so a delay is a conversation and not a default.
What to send us
The contract or details of the property you are buying, the address and expected price of the property you are selling, current loan balances, and your target settlement dates. From that we can give you an indicative rate, LVR and timeline — obligation free, with no impact on your credit score.