Bridging Loans in Australia

Bridging loans are a short-term financing solution that helps you purchase a new property while you’re still in the process of selling your existing one. They provide financial flexibility during the transition period, ensuring you don’t miss out on opportunities. This guide by FS Loan explains how bridging loans work and how to use them effectively.

What Is a Bridging Loan?

A bridging loan is a temporary loan that “bridges the gap” between buying a new property and selling your current one.

• Short-term loans typically last a few months
• Helps you access funds before your existing property is sold
• Often interest-only during the bridging period
• Converts to a standard loan after sale

Who Should Consider a Bridging Loan?

Bridging loans are suitable for borrowers who need flexibility during property transitions, such as:

• Homeowners upgrading to a new property
• Buyers who have found their next home before selling
• Property investors managing multiple transactions
• Individuals wanting to avoid rushed property sales

How Do Bridging Loans Work?

Bridging loans involve two key stages:

For example:

• Bridging Period: You hold both properties temporarily, and repayments may be reduced or interest-only
• End Loan: After selling your existing property, the loan reduces to a standard home loan balance

Lenders calculate a “peak debt,” which includes your current loan and the new purchase.

How Much Can You Borrow with a Bridging Loan?

Borrowing capacity depends on:

• Value of your current property
• Expected sale price
• New property purchase price
• Existing loan balance and debts

In general:

• Lenders assess your ability to manage the peak debt
• Conservative estimates may be used for your sale price
• A strong equity position improves approval chances