Bridging Loans - How To Buy Before You’ve Sold

Whether you’re upsizing, downsizing or relocating, buying a new home before you’ve sold your current home can feel tricky. You might need the equity in your existing home, or maybe you don’t have the borrowing power to juggle two mortgages at once.

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A bridging loan could be the solution. It’s designed for buyers who want to secure their next property first, move in, and then sell their old home.

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What Is A Bridging Loan?

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A bridging loan is a short-term loan that allows you to buy a new home before you’ve sold your current one. Most lenders will give you 6 to 12 months where you can own both properties before your old home must be sold.

This type of loan is useful for a variety of circumstances. You might want to move into your new home and take the time to renovate your old one before listing it, to achieve a better sale price. Without a bridging loan, you may have to complete those renovations while still living in the property - or rent elsewhere in the meantime. Or perhaps you're relocating, either to a new suburb or interstate, and need to settle on your next property before your existing one has sold.

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How Does A Bridging Loan Work?

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Most lenders will lend you 100% of the funds required to purchase the new home, including covering costs like stamp duty. This means you don’t need a deposit to proceed.

Each lender structures their loans differently, but typically, you’re assessed based on the debt you’re expected to have remaining once your old home is sold. This means you don’t need to have the income to support two home loans - just the one home loan you’ll hold once the sale has gone through.

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The bank will value the home you already own, as they will need to take security over both the home you already own and the one being purchased. Once your current property is sold, lenders generally expect the loan-to-value ratio (LVR) of the remaining loan to be 80% or less. If you’re a first home buyer with only have 5% equity, you may not yet be eligible for a bridging loan – but there may be alternative options, so it’s worth speaking to a broker.

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It’s worth noting that not every lender offers bridging loans, so you may need to move your current home loan to a lender that offers these types of loans as part of the process.

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Take a look at this handy diagram that takes you through each step:

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What Does A Bridging Loan Cost?

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This depends on the lender; some charge a higher interest rate on these loans due to the short-term nature of the loan, aiming to recover the cost of having the loan approved and set up; while some lenders treat these loans exactly as they would a standard loan and charge the same rates and fees. We’ll always recommend the most cost-effective solution based on your circumstance. However, eligibility for lower-rate products will still depend on equity, credit history, and overall financial position.

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Because most lenders don’t pay broker commissions on bridging loans, Hello Home Loans charges a fee for facilitating them. The fee is calculated on a case-by-case basis depending on the complexity of the loan application and the amount of work involved. In most cases, it’s between $2,000 and $3,000, paid upfront before your application is submitted. It’s a worthwhile investment to ensure your finance is set up correctly and you have ongoing support throughout the process.

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Common questions

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I have no income to support a bridging loan but once I have sold my home, I won’t have any debt? Am I eligible for a bridging loan?

Yes, if you meet the criteria of some lenders, you can get a bridging loan with no income. Some banks assess the expected debt remaining once the property is sold. This is a great option for retirees who want to downsize or relocate where they can access finance from first tier, cost effective lenders, without requiring income to support the loan.

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Can I get a pre-approval for a bridging loan before I start making offers?

Yes! Not only is it possible but we highly recommend a pre-approval for a bridging loan is sought before making offers. A pre-approval provides peace of mind that the bank has approved you for bridging up to a certain amount, and ensures the strongest negotiating position for you when making offers to purchase, helping you avoid disappointment should you miss out on a property if your finance falls through after making an offer.

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I’m separating from my partner, and we’re selling our jointly owned home. I want to buy a home just for myself, is it possible to get a bridging loan?

Yes, if you're separating from your partner and selling a jointly owned property, some lenders may consider a bridging loan for your individual purchase, provided your income, credit history and equity position are strong. In most cases, you’ll need to provide documentation like a court order or formal separation agreement that outlines your legal entitlement to the sale proceeds.

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Do I need to make repayments on my bridging loan?

Lenders look at this differently, some lenders require no repayments where they expect there to be no debt remaining. The interest charged is added to the balance and paid off when the property is sold.

If there’s likely to be residual debt after the sale, the loan will be treated like a standard home loan with monthly repayments, which can be split into fortnightly or weekly payments, if preferred. Repayments will begin once you settle on the new property.

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What happens if my old property doesn’t sell within the bridging period?

This is a very rare occurrence, however, if your property doesn’t sell within the bridging period, some lenders may offer an extension, but this can come with extra costs or changes to the loan terms converting it into a standard home loan. It’s important to go into a bridging arrangement with a clear sale strategy.

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When Should You Talk to a Broker?

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The best time to speak with a broker is now – even if you're not ready to buy immediately, or in the planning stage. Bridging loans are more complex than standard loans and require more detailed assessment. For example, they rely on full physical valuations rather than online estimates, which can add time to the process.

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We've helped many clients use bridging loans successfully - from helping a couple move from a small 400sqm block in south of Brisbane to a large acreage in Forestdale, Logan; to supporting downsizers making a lifestyle change from Brisbane to Ipswich. Every client’s situation is unique, and that’s why tailored advice matters.

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If you’re considering buying before you’ve sold, now is the right time to start the conversation and book an appointment with your broker. Don’t risk falling in love with a property that might not work out for you. Book a free, no-obligation chat with one of our experienced brokers. We'll help you understand your options, answer all your questions, and create a clear path forward.

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