Bridging loans explained

Average customer rating: 4.3/5

A guide to how bridging finance works

Updated 11 April 2024
Written by James Hurwood
Reviewed by Stephen Zeller

Why consider a bridging loan?

For borrowers in a very specific set of circumstances, a bridging loan can offer:

  • Access to finance in a situation where it might be difficult to obtain a different kind of home loan.
  • Flexibility and breathing room to find a buyer for your previous home after you’ve bought your new property.
  • Reduced home loan repayment costs during the interim period, before your old property sells.

What to keep in mind when choosing a bridging loan

If you think a bridging loan might be worth considering, here are some key considerations to remember when comparing your options:

  • While you’re waiting to sell your existing property, you’ll likely be making interest-only repayments towards your loan – so a competitive interest rate is key.
  • Bridging loans typically don’t allow for lenders mortgage insurance (LMI), so you’ll need at least 20% of the end debt value in either cash or existing equity.
  • Once you’ve sold your old property, your bridging loan will be converted to a standard home loan, so make sure you compare loans based on how they’ll end up as well as how they start out.

Expert tips for managing a bridging loan

Our General Manager of Money, Stephen Zeller, wants to help borrowers make home loan decisions that are appropriate for their circumstances. With that in mind, he has some tips for anyone considering taking out a bridging loan:

Stephen Zeller
General Manager – Money

Timing is everything

Because of the time-sensitive nature of bridging loans, you’ll want to try your hardest to coordinate your sale and purchase dates to cut down on bridging time and save on interest costs.

Keep a buffer on hand

Make sure you’ve got a contingency fund set aside to cover any unforeseen expenses that might pop up during your bridging period.

Compare your options!

Comparison is crucial when looking for a competitive home loan product – be sure to compare a range of offers from different lenders so you know what your options look like before submitting a loan application.

All about bridging loans

What is a bridging loan?

How does a bridging loan work?

Types of bridging loans

What are the pros and cons of bridging loans?

Could a bridging loan be appropriate for you?

Who’s eligible for a bridging loan?

Can I build a new home with a bridging loan?

Can I make regular repayments to pay off my bridging loan early?

Important to know

What are the interest rates on bridging loans?

What if I don’t sell my existing property during the bridging period?

What if my property doesn’t sell for as much as I’d hoped?

What are some alternatives to a bridging loan?

Meet our home loans expert, Stephen Zeller

Stephen Zeller
General Manager – Money

Stephen has more than 30 years of experience in the financial services industry and holds a Certificate IV in Finance and Mortgage Broking. He’s also a member of both the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the Mortgage and Finance Association of Australia (MFAA).

Stephen leads our team of Home Loan Specialists, and reviews and contributes to Compare the Market’s banking-relating content to ensure it’s as helpful and empowering as possible for our readers.