Key Takeaway

A bridging loan is a short-term home loan that covers the gap between buying your next property and selling your current one. You borrow against the equity in your existing home to fund the deposit and settlement on the new property, then repay the bridging loan once your old home sells. Bridging loans typically run for 6 to 12 months, carry higher interest rates than standard home loans, and require strong serviceability because you are temporarily servicing two properties at once.

How Bridging Loans Work in Australia

A bridging loan lets you access the equity in your current home before it sells, so you can settle on your next property without waiting. According to ASIC MoneySmart, the lender assesses your combined loan-to-value ratio (LVR) across both properties and your ability to service both loans temporarily (MoneySmart, 2026).

Most bridging loans are structured as interest-only for the bridging period, keeping repayments lower while you carry both properties. Once your existing home sells, the bridging portion is repaid and you revert to a standard home loan on the new property. The loan amount is based on the equity you hold in your current home (usually the difference between its market value and your remaining mortgage balance), less the lender’s LVR cap, which is typically 80 per cent to avoid lenders mortgage insurance (LMI).

Settlement timing drives most bridging loan decisions. If you have secured your next home but your current property has not yet sold, or if the settlement dates do not align, bridging finance covers the shortfall. As covered in Principles of Finance, short-term credit instruments fill timing gaps in asset transactions, and bridging loans apply this concept to residential property transitions.

What Bridging Loans Cost

Bridging loan interest rates sit above standard variable and fixed rates, reflecting the short-term nature and higher lender risk. Rates vary by lender and your LVR, but expect to pay a premium of 1 to 2 percentage points above the standard home loan rate advertised at the time. Interest is capitalised (added to the loan balance) rather than paid monthly, so your total interest cost accumulates until the bridging loan is repaid.

Additional costs include:

  • Application and valuation fees on both properties, as the lender values your existing home and the new purchase.
  • Legal and conveyancing costs for both transactions.
  • Break costs if your existing loan is fixed and you repay it early after the old property sells.
  • LMI if your combined LVR exceeds 80 per cent across both properties.

The comparison rate (which includes most fees and charges) gives a clearer picture of the total cost, but bridging loan comparison rates are less standardised than for standard home loans because the loan term is short and variable. Rates and fees are current as of July 2026; confirm current terms with a licensed lender or mortgage broker before deciding.

Serviceability and Eligibility

Lenders assess your ability to service both loans at once, even though the bridging period is temporary. Serviceability calculations factor in your income, existing debts, living expenses, and the combined repayments on both properties. The Reserve Bank of Australia’s cash rate influences lending standards, and higher rates tighten serviceability buffers (RBA, 2026).

You will generally need:

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  • Equity of at least 20 per cent in your current home to avoid LMI, though some lenders allow higher LVRs with insurance.
  • Proof of strong income and employment stability, as you are servicing two mortgages.
  • A clear sale strategy for your existing property, often demonstrated by a listing or sale contract.

Eligibility and limits vary by lender, product, and your personal circumstances. Speak with a licensed mortgage broker or lender to confirm whether bridging finance suits your situation, and compare offers from multiple lenders to find competitive rates and terms.

Is a Bridging Loan Right for You?

Bridging finance works best when you have found the right property and cannot wait for your current home to sell, and when you have sufficient equity and income to service both loans temporarily. It avoids the risk of missing out on your next home or needing to arrange temporary accommodation.

The alternative is a sale-first approach (sell your current home before buying the next one), which eliminates bridging costs but may require temporary rental accommodation or accepting a property you are less certain about. Weigh the convenience and certainty of bridging finance against the higher interest cost and serviceability pressure.

Before committing, confirm the bridging loan’s total cost (including capitalised interest, fees, and any LMI), check whether your lender offers an offset account or redraw facility on the bridging portion to reduce interest, and have a realistic timeline for selling your existing property.

Next Step

Speak with a licensed mortgage broker or lender to assess your equity position, serviceability, and bridging loan options. Compare rates, fees, and terms from multiple lenders, and confirm the total cost including the comparison rate and all settlement fees. If you decide to proceed, ensure your existing property is listed or under contract to keep the bridging period as short as possible.

General advice warning: This information is general in nature only and does not consider your objectives, financial situation, or needs. You should consider obtaining personal advice from a licensed mortgage broker or financial adviser before acting on it. This article is not personalised financial, lending, or legal advice. Advertised rates differ from the comparison rate, which includes most fees and charges. Rates, fees, eligibility, and product features are current as of July 2026 and change frequently; verify current terms with a licensed lender or broker before deciding. Bridging loan costs, LVR limits, and serviceability requirements vary by lender, product, and your personal circumstances.