What Is a Bridging Loan?
A bridging loan is short-term finance that covers the gap between purchasing a new property and selling your existing one. Instead of being forced to sell first (and potentially rent or make conditional offers), a bridging loan lets you:
- Purchase the new property unconditionally (stronger buying position in auction/negotiation)
- Move into the new property before selling the old one
- Prepare and present the existing property properly for sale without living in it
- Avoid the cost and stress of a temporary rental
Bridging loans are typically held for 6–12 months — the time needed to sell the existing property. Once the existing property sells, the bridging loan is repaid and you are left with just the standard home loan on the new property.
How Bridging Finance Is Structured
There are two main structures for Sydney bridging loans:
- Closed bridging loan: You have already exchanged contracts on the sale of your existing property — just waiting for settlement. The bridging period is short and known. Lenders prefer this structure and will offer better rates.
- Open bridging loan: Your existing property has not yet been sold. The bridge period is uncertain (up to 12 months). Lenders apply a premium to account for the uncertainty of when (and whether) the sale will occur.
| Example | Values |
|---|---|
| New property purchase price | $1,400,000 |
| Existing property value | $1,100,000 |
| Existing home loan | $350,000 |
| Total peak debt (bridging) | $1,750,000 ($1.4M + $350K) |
| After existing property sells | $1.4M - ($1.1M - $350K) = $650,000 end debt |
| Bridging period interest (6mo, 6.5%) | ~$56,875 (interest on peak debt) |
What Does a Bridging Loan Cost?
The main costs of bridging finance in Sydney:
- Interest rate: Bridging rates are typically 0.5–1.5% higher than standard variable rates. In 2026, bridging rates run approximately 6.5–7.5% p.a.
- Capitalised interest: Most bridging loans allow interest to be capitalised (added to the loan balance) during the bridging period — so you make no monthly payments until settlement. This is a cash flow benefit but increases total debt.
- Application and valuation fees: Both properties need to be valued. Allow $1,000–$2,000 in additional fees.
- Timing risk: If the existing property takes longer to sell, or sells for less than expected, the cost increases and the end debt is higher than projected.
Is a Bridging Loan the Right Strategy?
A bridging loan makes sense when:
- You have found your next property and want to buy unconditionally without a "subject to sale" condition
- The Sydney auction market requires unconditional bidding
- You have significant equity in your existing property (LVR below 50–60%) — providing a buffer against valuation outcomes
- The existing property is likely to sell quickly (4–8 weeks typical in a good Sydney market)
It may not make sense when:
- Your existing property is in a slow market or is unusual/difficult to sell quickly
- You have limited equity — the total peak debt LVR exceeds 80%
- Carrying two sets of costs simultaneously would significantly stress your finances
Alternatives include: making a conditional offer (subject to sale), requesting a vendor's extended settlement, or renting temporarily between the two sales. Our brokers can walk through the pros and cons for your specific situation.
For further bridging loan information, visit Home Loans Hub. Check your equity using our Mortgage Repayment Calculator.
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📅 Book a Free Call Get in Touch →Frequently Asked Questions
A bridging loan is short-term finance that allows you to purchase a new property before selling your existing one. The loan covers the period between buying the new property and receiving the proceeds from selling the old one — typically 6–12 months. Once the old property sells, the bridging loan is repaid and you are left with just the standard mortgage on the new property.
Bridging loan interest rates are typically 0.5–1.5% above standard variable rates — in 2026 this means approximately 6.5–7.5% p.a. Interest can usually be capitalised (rolled into the loan) during the bridging period, meaning no monthly payments are required until the old property sells. Total cost depends on how long the bridge period lasts.
No. A bridging loan allows you to buy first and sell after. This gives you a significant advantage in Sydney's competitive auction market, where unconditional bidders are preferred by vendors and agents. You can move into the new property, present the old property properly for sale, and avoid temporary rental costs.
Most bridging lenders cap total peak debt LVR at 75–80% of the combined value of both properties. For example, if your existing property is worth $1.1M and the new property costs $1.4M, the combined value is $2.5M — 80% LVR means maximum peak debt of $2M. If your existing loan is $350,000, you need the new property purchase to keep total debt within the $2M cap.
Yes. Bridging loans are available through both major banks and specialist lenders. A broker will compare the structure, interest rate, and capitalisation options across available lenders to find the most cost-effective bridging solution for your situation. The broker's service is free.