When you spot an investment opportunity that won't wait, a bridging loan gives you the funds to purchase before your existing property sells.
This type of short term property finance covers the gap between buying and selling, letting you secure that property without rushing into an underselling situation or missing out altogether. The application process typically takes days rather than weeks, which matters when you're competing at auction or facing a tight settlement deadline.
How Bridging Finance Works for Investment Purchases
A bridging loan uses both your current property and the new investment property as security. The lender assesses the combined value of both properties against the total loan amount you need. Most lenders will approve up to 80% loan to value ratio across both securities without requiring lenders mortgage insurance, though some will consider higher ratios depending on your circumstances.
You're effectively carrying two properties at once during the bridging period. Your lender advances the funds to purchase the investment property while your existing home remains on the market. Once your current property sells, the sale proceeds pay down the bridging loan and you revert to a standard home loan on whichever property you're keeping.
Consider a buyer who owns a property in Brunswick worth $850,000 with a $400,000 mortgage still owing. They've found an investment property in Coburg priced at $620,000. The lender calculates the total security value at $1,470,000 and the total loan requirement at $1,020,000 (the existing $400,000 plus the new $620,000). That gives an LVR of roughly 69%, which sits comfortably within most lenders' criteria for bridging finance.
The Cost Structure You're Actually Paying
Bridging finance costs include both the interest rate and how that interest gets charged. Most lenders capitalise the interest during the bridging period rather than requiring monthly repayments. This means the interest accumulates and gets added to your loan balance, then gets paid from your sale proceeds when you sell your existing property.
The interest rate on bridging finance typically sits higher than standard variable rates. You're looking at a margin above standard variable, charged only on the additional funds you're borrowing for the new purchase. Your existing home loan usually continues at its current rate during this period.
Bridging loan fees include application costs, valuation fees for both properties, and often a line fee charged monthly during the bridging period. Across a six month bridging arrangement on a $600,000 advance, you might pay $8,000 to $12,000 in total costs including capitalised interest and fees, though this varies significantly based on your lender and loan structure.
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Peak Period Length and Exit Strategy
Most lenders structure bridging finance with a maximum term of six or twelve months. The temporary finance period gives you time to sell your existing property without the pressure of a rushed sale.
Your exit strategy forms a critical part of the bridging loan application. Lenders want to see that your property is genuinely saleable and priced appropriately for current market conditions. In suburbs like Fitzroy North or Carlton, where properties typically move within 30 to 60 days, lenders view the bridging arrangement as lower risk. In outer areas where sale periods stretch longer, you may need a stronger equity position or a lower asking price to satisfy lender requirements.
The urgency of auction finance often pushes buyers toward bridging arrangements. When you're bidding at auction on an investment property in Richmond or Hawthorn, you can't make your offer conditional on selling your current home first. The bridging loan gives you unconditional buying power while protecting you from having to sell your existing property in a rushed timeframe.
When This Type of Finance Works and When It Doesn't
Bridging finance works when you have sufficient equity across both properties and a realistic timeline for selling your existing home. It suits buyers who've found an investment opportunity in a strong rental area like Thornbury or Preston, where both capital growth and rental return justify moving quickly.
The approach doesn't work if your existing property will struggle to sell or if the combined loan amount pushes your LVR above lender limits. Some buyers overestimate their property value or underestimate how long the sale will take. If your property has been on the market for three months without a sale, lenders will question whether bridging finance is appropriate.
Investment loan refinancing becomes relevant once you've sold your original property and want to optimise the loan structure on your new investment. You might refinance to access a lower interest rate, release equity for future purchases, or restructure the loan term to match your investment strategy.
Alternatively, if you discover your equity position can support both properties long term without selling, releasing equity to purchase might let you keep both properties as investments rather than selling the original home.
What FinancePath Does Differently
We access loan options from banks and lenders across Australia, which matters because bridging loan approval criteria and interest rate pricing varies significantly between lenders. Some lenders specialise in quick bridging finance approvals for straightforward scenarios. Others handle complex situations like self-employed borrowers or properties requiring unconventional valuations.
The conversation usually starts with your timeline. If you need to exchange contracts within two weeks, we focus on lenders who can deliver fast approval. If you're planning ahead and have flexibility, we can structure the bridging loan application to minimise costs or secure better terms.
Call one of our team or book an appointment at a time that works for you. We'll review your property values, calculate your bridging loan amount and LVR, and explain exactly what the temporary finance period will cost based on current lender pricing.
Frequently Asked Questions
How long does bridging loan approval take?
Most bridging loan applications receive approval within 3 to 7 days for straightforward scenarios. Complex situations involving multiple securities or non-standard income may take 10 to 14 days, but this still delivers faster approval than conventional finance options.
What happens if my property doesn't sell during the bridging period?
If your property hasn't sold by the end of your bridging loan term, most lenders will extend for another period or convert the arrangement to a standard loan structure. You'll need to demonstrate continued ability to service both loans or agree to reduce your asking price to achieve a sale.
Can I use bridging finance with a small deposit on the investment property?
You don't typically need a cash deposit for the investment property when using bridging finance, as your equity from your existing property acts as security. However, you need sufficient combined equity across both properties to keep your total LVR within lender limits, usually 80% or below.
Do I pay interest on both loans during the bridging period?
Yes, you're charged interest on both your existing home loan and the additional bridging advance. Most lenders capitalise the bridging loan interest, meaning it accumulates and gets paid from your sale proceeds rather than requiring monthly repayments during the bridging period.
What's the maximum bridging loan amount I can borrow?
Your maximum bridging loan amount depends on the combined value of both properties and your existing debt levels. Most lenders will lend up to 80% of the total security value, though your borrowing capacity also depends on your income and ability to service the loans temporarily.
