Smart Ways to Use Bridging Loans Between Sales

A bridging loan lets you buy your next apartment before selling the property you still own with your former partner.

When you're separating and need to move quickly into your own place, waiting for the sale of a jointly owned property can mean missing out on the right apartment. Bridging finance covers the gap between buying and selling by using both properties as security for a temporary period, usually up to 12 months.

How Bridging Finance Works When One Partner Buys First

You borrow against the equity in the property you're selling, plus the deposit for your new apartment, and the lender holds both as security until the original property settles. Once the sale completes, you use those proceeds to repay the bridging portion and convert to a standard home loan on your new apartment.

Consider someone who has agreed to sell the family home but found an apartment that suits their budget and location needs. Rather than renting temporarily or losing the apartment to another buyer, they use bridging finance to secure the purchase. The family home is listed for sale with a 90-day settlement target. The bridging loan covers the new apartment deposit and purchase costs, with interest capitalised during the bridging period. When the family home sells, the proceeds pay out the bridging component, leaving a standard mortgage on the apartment.

When Bridging Makes Sense During Separation

Bridging finance works when you have sufficient equity in the property being sold, a clear exit strategy, and the ability to service both loans temporarily if needed. Most lenders require at least 20% equity across both properties combined, though some will consider lower equity with a strong application.

The timing matters. If your property settlement is already documented and the sale is under contract or actively marketed, lenders view the exit strategy as realistic. If the property hasn't been listed yet or there's disagreement about the sale price or timing, approval becomes harder. You'll also need to show you can afford the new apartment loan on your individual income once the bridging period ends, since that's what you'll be paying long-term.

Bridging Loan Costs and How They Add Up

Interest rates on bridging finance sit higher than standard variable rates, typically between 0.5% and 1.5% above the lender's standard variable rate. Interest is usually capitalised, meaning it's added to the loan balance rather than paid monthly, which keeps your cash flow manageable during the transition.

Beyond interest, expect an application fee, a settlement fee for each property transaction, and valuation costs for both properties. If you're borrowing above 80% LVR across both securities, lenders mortgage insurance may apply. Legal fees also increase because you're managing two settlements close together. The total cost depends on how long the bridging period runs and how much you're borrowing, but budgeting an extra few thousand dollars in fees and several months of capitalised interest gives you a working estimate.

Peak End Bridging Period and What Happens if the Sale Delays

Most bridging loans are approved for six or 12 months. Lenders set that term based on realistic sale expectations for your property type and location. If the property doesn't sell within the approved bridging term, you'll need to either extend the facility, which may involve another approval process and additional fees, or find another way to repay the bridging component.

Some lenders offer what's called peak end bridging, where they assess your ability to service both loans simultaneously for a period if the sale takes longer than expected. This gives you a safety net but requires stronger income or savings to demonstrate you can manage both repayments. If your income alone doesn't support peak end serviceability, the lender may decline the application or require a co-borrower or guarantor.

Alternatives Worth Considering Before Committing

If bridging finance feels too tight or the costs don't suit your situation, other options exist. A guarantor loan using a family member's property as additional security can help you buy without needing to bridge. Renting short-term while the sale completes avoids the cost and complexity of bridging altogether, though it also means moving twice. Some separating couples also explore equity release to access funds for a deposit without triggering an immediate sale, though this depends on both parties agreeing and the property having enough equity to split.

Another approach is negotiating a longer settlement period on your apartment purchase, giving the family home more time to sell before you need the funds. Not all sellers will accept this, especially in a busy market, but it's worth discussing with your conveyancer if the timing is borderline.

What Lenders Need to Approve Your Application

Lenders assess bridging applications by looking at equity, exit strategy, and serviceability. They'll want a valuation of both properties, evidence that the property being sold is listed or under contract, and proof of your income to service the new apartment loan independently. If the sale hasn't started yet, they'll ask for a clear timeline and marketing plan.

You'll also need to show the purchase contract for your new apartment, confirmation of your deposit, and details of how the settlement will be funded. If you're relying on the sale proceeds to cover part of the apartment purchase, the lender needs to see that the numbers align. During separation, having your property settlement agreement or consent orders documented helps clarify who's entitled to what portion of the sale proceeds, which makes the approval process more straightforward.

Making the Decision That Fits Your Timeline

Bridging finance solves a specific timing problem but isn't the right fit for every separation. If your property is likely to sell within a few months, you have enough equity to support both loans, and buying now saves you from renting or missing the right property, it's worth exploring. If the sale timeline is uncertain, your equity is limited, or the costs feel too high relative to the benefit, waiting or choosing an alternative may make more sense.

The application process typically takes one to two weeks once you've gathered the necessary documents, so if you've found an apartment and need to move quickly, starting the conversation early gives you options. Most lenders who offer bridging finance also provide standard home loans, so the transition from bridging to a ongoing mortgage on your new apartment happens with the same lender unless you choose to refinance after settlement.

Call one of our team or book an appointment at a time that works for you. We'll look at your equity position, talk through the timing of your sale, and work out whether bridging finance fits your situation or whether another structure makes more sense for where you're at.

Frequently Asked Questions