Buying your next property before selling your current home can create a funding gap. A bridging loan, also known as bridging finance, is a short-term home loan designed to cover that gap, giving you time to buy or build before your existing property sells.
During the bridging period, your existing mortgage and the funds needed for your new property form your peak debt. When your existing property sells, the net sale proceeds reduce this balance to your end debt, which becomes your ongoing home loan.
This guide explains how bridging finance works in Australia, including bridging loan rates, costs, repayments, borrowing limits and the key considerations before applying.
A bridging loan, also known as bridging finance, is a short-term home loan that lets you buy or build your next property before selling your current one.
Instead of having to sell first or coordinate both settlements on the same day, bridging finance gives you a set period to sell your existing property after securing your next one.
A short-term bridging loan generally runs for 6 to 12 months, depending on whether you are buying an established property or building. Once your existing property sells, the sale proceeds reduce the bridging loan and the remaining balance continues as a standard home loan.
Bridging finance can be used to:
At Yard, bridging home loans are available to both owner-occupiers and property investors.
A bridging loan may suit you if you want to secure your next property before your current property has sold. It can give you more control over when you buy, move and sell.
Common reasons include:
A bridging loan temporarily combines your existing mortgage with the funds required for your new property. When your existing property sells, the net sale proceeds reduce the loan to the balance you will keep as your ongoing home loan.
Bridging finance in Australia generally works in four steps:
The two figures that are particularly important when calculating a bridging loan are your peak debt and end debt.
The difference between an open bridging loan and a closed bridging loan is whether you have a confirmed sale and settlement date for your existing property.
An open bridging loan provides greater flexibility if you want to buy your next property before securing a buyer for your current home. With a closed bridging loan, there is greater certainty around when the bridging period will end because the sale has already been agreed.
Open and closed bridging loans describe different bridging scenarios rather than separate Yard loan products. Availability and lending requirements will depend on your individual circumstances.
Peak debt is the highest amount you owe during the bridging period. End debt is the amount you owe after your existing property sells and its net sale proceeds are applied to your loan.
Your peak debt may include:
Your end debt is calculated after the net proceeds from selling your existing property are applied to the loan. Selling costs, such as agent and conveyancing fees, reduce the amount available to repay your peak debt.
This distinction matters because interest is charged on the amount outstanding during the bridging period, while your ongoing borrowing capacity is assessed against the debt you are expected to retain after the sale.
Consider the following example.
These figures are for illustrative purposes only. Your actual position will depend on your property values, existing debt, costs and cash contribution.
A bridging loan calculator can help you estimate your peak debt, end debt and loan-to-value ratio before you apply for bridging finance.
To calculate your bridging position, you will generally need:
A bridging loan calculator can then show the approximate maximum debt you could hold before selling and the home loan balance you could be left with afterwards. Use Yard's bridging loan calculator to estimate your peak debt, end debt and LVR based on your circumstances.
No. With a Yard bridging loan, your existing mortgage and the finance for your new property form one combined loan balance during the bridging period. During this period, repayments are interest only.
You may also be able to capitalise the interest, subject to lending criteria. Capitalising interest means adding it to your loan balance rather than paying it each month.
This can reduce the immediate impact on your cash flow while you hold both properties, but it also increases your loan balance and the total interest you pay.
You can make unlimited repayments during the bridging period, which can help reduce your outstanding balance and interest costs.
Yard lends up to 80% of the combined value of your existing and new properties, with bridging loans ranging from $150,000 to $10 million.
How much you can borrow depends on factors including:
Yard assesses your borrowing capacity based on the loan you are expected to retain after your existing property sells.
For self-employed borrowers, both full-doc and low-doc income verification may be available, subject to lending criteria. Use Yard's bridging loan calculator to get an initial estimate of your peak debt, end debt and LVR.
Bridging loan interest rates vary between lenders and may differ from standard home loan rates. The total interest you pay also depends on your outstanding bridging balance and how long you hold the loan before your existing property sells.
Interest is charged on the amount outstanding during the bridging period. The longer it takes to sell your existing property, the longer interest continues to accrue.
If you choose to capitalise your interest, the interest is added to your loan balance rather than paid monthly. This can help with cash flow during the bridging period, but increases the balance you ultimately need to repay.
When comparing bridging finance rates, consider the overall cost rather than the interest rate alone. This includes the bridging loan rate, how interest is calculated, whether it can be capitalised and any applicable loan fees.
See Yard's bridging loan rates for current pricing.
In addition to interest, there may be costs associated with buying your new property, arranging the bridging loan and selling your existing property.
These can include:
These costs should be considered alongside the bridging loan interest rate when working out the overall cost of bridging finance.
Your sale timeframe is also important. The longer you hold the bridging loan, the more interest you are likely to pay.
If your existing property sells for less than expected, your end debt will be higher because less money is available to reduce your bridging loan.
For example, if you expected your property to sell for $600,000 but it sold for $550,000, there would be $50,000 less, before considering any difference in selling costs, available to reduce your bridging balance. This can leave you with a larger ongoing home loan and higher repayments.
Using a realistic estimated sale price when calculating your bridging loan can help you understand how a lower sale price could affect your end debt.
By the end of the bridging term, your existing property is expected to have sold and the net sale proceeds applied to your loan. Your remaining end debt then continues as a standard home loan.
If your property has not sold as the end of the term approaches, contact your Yard Consultant as early as possible to discuss your circumstances and available options. Planning for a delayed sale early is preferable to waiting until the final weeks of the bridging period.
A bridging loan for construction lets you fund a new build while continuing to own and live in your existing property. Unlike buying an established home, construction funds are released progressively as the build reaches agreed stages.
This means your bridging balance generally increases as construction progresses.
For example, if your build costs $700,000, you are not charged interest on the entire $700,000 from day one. Funds are released through construction progress payments, with interest applying as amounts are drawn.
This differs from buying an established property, where the purchase funds are generally advanced at settlement. Bridging finance for construction can therefore allow you to remain in your existing home throughout the build, move into your new home when it is ready and then sell your existing property.
This example is for illustrative purposes only. Individual circumstances and lending criteria apply.
If bridging finance is not the right fit, there are other ways to manage the gap between selling and buying.
The right option depends on your financial position, the property market, how quickly you expect to sell and how important it is to secure your next property before selling.
A bridging loan can give you more flexibility over when you buy, sell and move, but you need to consider the additional debt and interest during the bridging period.
Yard provides bridging finance for owner-occupiers and property investors who want to buy or build before selling their existing property. As a non-bank lender, Yard offers a simpler path to specialist lending.
Bridging loans run for 6 to 12 months, with interest-only repayments during the bridging period. You may also have the option to capitalise interest, subject to lending criteria. Rather than assessing you against your peak debt, Yard bases your borrowing capacity on the end debt you are expected to retain once your existing property sells. From enquiry through to settlement, a Yard Consultant manages your application and gives you one point of contact throughout. Each application is assessed individually, taking into account your equity, property values, financial position and expected end debt.
To get started, use Yard's bridging loan calculator to estimate your peak debt and end debt, explore our home loan calculators, or talk to a Yard Consultant.
A bridging loan is short-term finance designed to cover the period between buying or building your next property and selling your existing one. A standard home loan is long-term finance used to hold the property after the bridging period ends.
Yes. A bridging loan can be used to fund construction while you remain in your existing property. Construction funds are generally released progressively as the build reaches agreed stages. Speak to a Yard Loan Consultant to enquire more.
A bridging loan is a short-term home loan that lets you buy or build your next property before selling your current one. Once your existing property sells, the net sale proceeds reduce the bridging balance and the remaining debt continues as your ongoing home loan.
A bridging loan may be worth considering if buying before selling gives you more flexibility, helps you avoid temporary accommodation or allows you to secure the property you want. However, you need to weigh those benefits against the interest and other costs of carrying a larger loan until your existing property sells.
A closed bridging loan is where your existing property has already sold and you have a confirmed settlement date. The bridging loan covers the period between purchasing your next property and receiving the proceeds from your existing property sale.
An open bridging loan allows you to buy your next property before you have a confirmed sale or settlement date for your existing property. You have an agreed bridging period in which to sell your existing property and use the sale proceeds to reduce the loan.
Bridging loan interest rates vary between lenders and may differ from standard home loan rates. Your total interest cost also depends on your outstanding loan balance and how long you use the bridging finance. See Yard's bridging loan rates for current pricing.
If your existing property sells for less than expected, less money will be available to reduce your bridging loan. This means your end debt may be higher than estimated, resulting in a larger ongoing home loan.
A bridging loan temporarily combines your existing mortgage with the funds required for your new property. You then sell your existing property during the bridging period and use the net sale proceeds to reduce the loan to your end debt.
Yard lends up to 80% of the combined value of your existing and new properties, with loan amounts from $150,000 to $10 million. The amount you can borrow depends on your equity position and your ability to service your expected end debt.
Yard bridging loans run for 6 to 12 months, giving you time to sell your existing property or complete your new build.
Yard bridging loans have interest-only repayments during the bridging period. You may also be able to capitalise the interest, subject to lending criteria, which means adding it to your loan balance rather than paying it monthly.
Yes, subject to lending criteria. Yard can assess eligible self-employed borrowers using full-doc or low-doc income verification, depending on their circumstances and available documentation.
Yes. Yard offers bridging finance to both owner-occupiers and property investors, subject to lending criteria.
Yes. Yard allows unlimited repayments during the bridging period. Reducing your outstanding balance can reduce the amount of interest you pay.
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