Buying your next home before selling the one you’re in can feel like a high-wire act; risky, stressful, and financially overwhelming. A bridging loan is one option some borrowers explore in situations where buying occurs before selling. If you're a first-time upgrader wondering "How do bridging loans work in Australia?" or "Can I buy before I sell?", this guide is for you.
What Is a Bridging Loan?
A bridging loan is a short-term loan that "bridges the gap" between purchasing your new home and selling your current one. It lets you own two properties temporarily, typically for 6 to 12 months, allowing additional time between purchase and sale, subject to lender timeframes.
During the bridging period, you’ll usually pay interest-only on the total loan (your existing mortgage + the new home loan). Once your old property sells, the sale proceeds are used to reduce the loan, and you revert to a standard mortgage.
Why Would I Need One?
Sometimes buyers locate a property before their existing home has sold, which can create timing challenges. In hot markets or low-inventory areas, waiting to sell first could mean missing out.
Some borrowers consider bridging finance to manage the timing between buying and selling, depending on lender criteria and individual circumstances. Bridging loans can help some people to:
- Secure your next home without needing to sell first
- Avoid the stress of temporary rentals or rushed decisions
- Present your current home properly (clean, styled, even vacant if you like)
It is a specialised form of lending with specific requirements. A broker can explain how lenders assess bridging applications.
Pros and Cons at a Glance
- Pros:
- Flexibility to buy without a rushed sale
- May provide additional time before the sale occurs, depending on your circumstances
- Cons:
- Higher interest rates or fees may apply
- You must be able to service the combined debt temporarily
- Risk of owning two homes longer than expected if the sale is delayed
Planning and advice are key here. A broker can help you understand how repayments and timing considerations are assessed by different lenders.
Can First-Home Buyers Use Bridging Loans?
Bridging finance is mainly designed for existing homeowners upgrading to a new property, so it’s not suitable for first-home buyers. But if you’re now moving on from your first home to your second, this is a natural next-step tool worth understanding.
Final Tip: Have a Backup Plan
Even with bridging finance, things don’t always go to script. Delays in selling, changes in market conditions, or issues with settlement can crop up. Be sure to:
- Be aware that sale timing can vary. A financial adviser can help you plan for different scenarios
- Speak with your broker about exit strategies
- Stay in regular contact with your conveyancer to align dates
You’ve Got This — And We’ve Got You
Upgrading from your first home is a big step, and bridging loans can make that step smoother. But they’re not for everyone, and understanding how they work is crucial before jumping in.
That’s why we created the First & Next Home Buyer Guide, a free, easy-to-follow resource packed with tools to help you plan smarter. Inside you’ll find a breakdown of bridging loans, how to access your equity, checklists for simultaneous settlements, and expert advice to guide your next move.
Download the free e-book now and learn more about how the process works so you can make informed decisions aligned with your circumstances. It can be your smartest move yet.
