Bridging Loans: Buying Before You Sell

A bridging loan lets you buy your next home before you’ve sold the one you’re in. For a while the lender carries both: what you still owe on the current home plus the whole cost of the new one. When the old home sells, the proceeds pay that bridge down, and the loan you’re left with becomes your ordinary mortgage.

On the North Shore this is the usual way upgraders end up needing one. You find the house, the auction is in three weeks, your own place hasn’t been listed, and the agent is confident it’ll sell well once it is.

How a bridging loan works

Three numbers do all the work. Peak debt is the most you owe while you hold both homes. Bank Australia describes its bridging loan as the amount owing on the existing property, the contracted price for the new one, plus legal fees and other purchase costs, which is peak debt by another name. The bridge is the part the sale is expected to repay. End debt is whatever’s left once it has, and that’s the loan you’ll be paying off for the next twenty-odd years.

Interest during the bridge is handled in one of two ways. Some lenders add it to the loan each month and let the sale repay it, so there’s nothing to pay while you own both homes; Newcastle Permanent’s bridging loan, for example, has no repayments during the 12-month bridging period, with interest deferred. Others want interest-only repayments on the whole debt as you go, which keeps the loan from growing but can mean a five-figure monthly bill, and neither version is free.

How long lenders will carry both homes

Twelve months is the ceiling most published products set. Newcastle Permanent’s maximum is 12 months (rates effective 30 September 2026), and Bank Australia allows up to 12 months for buying or building (rates effective 31 July 2026). Some lenders set shorter limits for an established home. That’s less time than it sounds.

The end of the term is where the real constraint shows. If you can’t sell within 12 months, Newcastle Permanent says it may treat that as a default and take action to ensure the sale, and you may pay a rate 2% higher until it’s resolved. Read that line before you sign anything, because a bridge turns a slow sale into a forced one.

How lenders assess the end debt

A lender approving a bridge is really approving two loans. The bridge itself is short and secured by the home you’re selling; the end debt is a normal home loan, and your income has to carry it the same way it would carry any new loan, assessed at the rate plus APRA’s 3 percentage point serviceability buffer. For owner-occupiers, APRA’s limit on lending at six or more times income doesn’t apply to the bridging loan, which helps. It still applies to the loan you keep.

So the question every lender asks is what the end debt will be. The answer depends on a sale price nobody knows yet, and the lender won’t take your word or the agent’s for it. Lenders use their own valuation of the home you’re selling, not the agent’s appraisal, and a gap between the two comes straight off the loan they’ll approve.

The costs of holding two homes

Interest isn’t the only cost of carrying both properties. Transfer duty on the new home is payable when you buy, whatever happens to the old one, and on a $2.6 million house it runs to six figures. For a few months you’ll also pay council rates, water, insurance and possibly strata on both, and an empty home still has to be insured and kept presentable for inspections. None of it is large next to the interest, but it comes out of cash rather than the loan. Budget for it first.

Selling costs belong in the numbers too. Commission and marketing come off the sale price before anything repays the bridge, and your agent can quote both before you list, which is a better number to plan with than a percentage remembered from the last time you sold.

A hypothetical, run through the calculator

Here’s a hypothetical with invented numbers, run through our bridging loan calculator. A couple in Turramurra owe $500,000 and buy a house in Wahroonga for $2,600,000. NSW transfer duty on that is $124,287 on the calculator’s 2026–27 brackets, and they allow $5,000 for other buying costs, so peak debt is about $3,229,000. They expect their own home to sell for $2,200,000, less $44,000 of selling costs.

With six months of interest capitalised on the bridge at a hypothetical 7.59%, the loan they keep after the sale is about $1,156,000, including roughly $83,000 of interest. Paying interest as they go instead would cost about $20,400 a month for those six months. Both are real money.

Now the row that matters: if their home sells for 10% less, the loan they keep rises to about $1,376,000. Every dollar of the shortfall lands on the end debt, because there’s nowhere else for it to go.

When selling first is the better order

For context, the median non-strata sale price in Ku-ring-gai, which is mostly houses, was $3,300,000 in the March 2026 quarter (NSW Rent and Sales Report), so at those prices a 10% miss on the sale is a six-figure hole, and upgraders here are rarely short of equity but often short of certainty.

Our view, which plenty of agents and some brokers will disagree with: most upgraders should sell first unless the end debt still works with the sale price a tenth below the agent’s appraisal. Selling first costs a rental and two moves. That’s annoying and expensive. A bridge that goes wrong costs far more, and the people who push buy-first hardest rarely carry that risk themselves.

Buying first makes sense when the end debt works on a conservative price, the house you’re buying is genuinely hard to replace, and your own home is the kind that sells in weeks rather than months. It’s harder to justify for a unit in a building with ten others listed for sale at the same time.

There’s also a middle path. Sell first with a long settlement, or ask the buyer to lease the home back to you for a few months, and you can buy while your sale is still settling without a bridge at all. It depends on the buyer agreeing, and not every buyer will. But it’s worth raising with your agent before assuming a bridge is the only way to do this.

At auction, the order also decides what you can sign. In NSW, the highest bidder signs the contract with no cooling-off period, and Moneysmart notes an auction sale is final and not subject to finance. The bridge has to be approved before you raise your hand, which is what our pre-approval guide is about.

Charlie runs every bridging enquiry at the sale price you’d accept on a bad day, not the one you’re hoping for, and if the end debt only works at the top of the appraisal, he won’t write the bridge. He’ll say so in the first meeting. We’d rather lose the loan than set up a forced sale. The rest of the move, including keeping the old place as an investment instead of selling, is on our upgrading page.