Bridging finance explained: buying before you sell

What bridging finance does

Bridging finance is short-term lending used when the settlement of a new purchase happens before the sale and settlement of your existing home. The lender may take security over one or both properties, and the temporary lending is expected to be reduced or repaid from the sale proceeds. The structure, term, interest treatment, repayment requirements, and security arrangements are lender-specific.

How it compares with a sale-of-another-home condition

These solve different problems. A sale-of-another-home condition is a contract term: the purchase depends on a defined sale event, deadline, evidence, and notice process. Bridging finance is a lending arrangement: it gives you funding to settle the new purchase while the old home is still unsold or unsettled.

With a sale condition, the vendor carries more timing uncertainty and may not accept the offer. With bridging finance, the vendor may receive an unconditional purchase commitment, but you carry the risk of overlapping lending, interest, and the need to sell your old home. Sometimes a buyer uses both, but neither automatically protects you from every risk.

Read the full sale-of-another-home condition guide and ask your lawyer what the exact clause requires before signing or relying on it.

Costs to put on the table

Do not compare only the headline bridge rate. Ask for the written estimate of interest during the overlap, lender and application fees, valuation costs, legal and registration work, sale-agent commission, marketing, moving or storage, insurance, rates, body-corporate charges, and any break costs from changing fixed lending. Ask whether interest is paid monthly, added to the balance, or settled another way.

The calculator above uses a simple annual-rate estimate. It does not model daily interest, compounding, tiered facilities, lender fees, tax, sale commission, or the lender’s affordability assessment. Use actual quotes and written loan terms for a decision.

How it can go bad

• The old home takes longer to sell. Interest and overlapping repayments continue, and the lender’s time limit may approach.
• The sale price is lower. Net proceeds after the existing mortgage, sale costs, and other obligations may not repay the temporary lending as expected.
• The new valuation is lower. The lender may change the amount, security, deposit, or conditions before settlement.
• The exit plan is too optimistic. “It will sell soon” is not a documented sale, and a conditional offer may still fail to settle.
• The contract dates do not line up. A missed condition, notice deadline, or settlement date can create legal and financial exposure. Ask the lawyer before a deadline passes.
• The property is not financeable on the assumed terms. Insurance, title, building, body-corporate, or lender security questions can alter the plan.

Questions before choosing a path

• What is the lowest realistic sale price after commission, marketing, mortgage payout, and other sale costs?
• How long can the household carry both properties if the sale takes six or twelve months?
• What happens if the lender’s valuation is below the purchase price?
• Is the existing loan portable or can the security be substituted, and what fees or rate changes apply?
• What happens if the sale condition is not satisfied by its deadline?
• What evidence, insurance, valuation, legal documents, and lender conditions must be completed before settlement?
• What is the fallback if the old home has to be repriced, rented, or kept longer than planned?

Other paths to discuss

Depending on the facts, people may compare selling first and renting temporarily, aligning settlement dates, making a purchase conditional on sale, transferring or substituting existing lending, using available equity, or waiting until the current home is sold. These are not interchangeable solutions. A lender, lawyer, and—where relevant—financial adviser should explain the consequences for the specific household and contracts.