Bridging finance is designed for homeowners who want to buy their next property before the current home has sold. The lender temporarily funds a higher “peak debt”, then expects the existing property sale proceeds to reduce the debt to an ongoing balance. It can be useful, but the borrower needs a realistic exit plan and enough capacity under the lender’s bridging policy.
- Model peak debt and end debt separately
- Use a conservative sale price
- Include selling costs
- Understand the maximum bridging period
- Compare selling first versus bridging
Peak debt and end debt
Peak debt is the temporary total debt during the overlap period. End debt is the expected balance after the existing home is sold and sale proceeds are applied.
Lenders differ in how they assess interest during the bridge and how much serviceability they require against peak versus end debt.
The sale assumption matters
A plan based on an optimistic sale price can create a shortfall. Use a conservative expected sale figure and allow for selling costs, agent commission, legal fees and any mortgage discharge amount.
Bridging periods are time-limited, so delays in selling can become expensive.
Alternatives to compare
Subject-to-sale contracts, longer settlements, deposit bonds, temporary accommodation or selling first may be safer or cheaper in some circumstances.
The right choice is as much about risk tolerance and the local property market as it is about finance.
Frequently asked questions
Do I make repayments on the bridging portion?
Treatment varies by lender. Some structures capitalise some interest during the bridge, subject to policy.
What if my current home does not sell in time?
You may face higher costs or need another solution, so the sale strategy should be realistic from the start.
Can investors use bridging finance?
Some lenders have options, but policy is generally more specialised than owner-occupied bridging.