Bridging finance, explained

How bridging finance fits into a move

Your existing equity may be tied up until settlement. A lender may provide temporary finance so you can complete the next purchase first. Settled explains that buying before selling can leave you paying two mortgages until the first home settles.

Terms, approval rules, interest and repayment structures differ. Ask your lender or mortgage adviser for a written scenario using your actual properties, debt, income and dates. Do this before you sign a purchase agreement, not after the offer has become unconditional.

Settled's current seller guidance says bridging commonly means budgeting for two home loans until the existing property sells. It also warns that a slower or lower sale can leave more debt than planned. Treat those as scenarios to price, not distant edge cases.

Model the uncomfortable scenario, not only the smooth one

Run at least three cases: your expected sale and timing, a later sale, and a lower sale price. Include both loans, rates, insurance, utilities, legal work and any loan fees. Start with the likely net sale proceeds from your current home, after the mortgage and selling costs are paid.

Then test what happens if your buyer's agreement does not become unconditional or settlement is delayed. Keep a cash buffer for ordinary ownership and moving costs as well as the loan itself.

Ask how interest is charged and when it must be paid. Some arrangements allow interest to build during the bridging period, which eases the immediate cash-flow pressure but increases the amount owing. The written offer should show the cost under each timing scenario you have modelled.

Ask which assumptions are conditions of the approval: the current home's estimated sale price, an unconditional sale, a maximum bridging period, a minimum amount of equity or evidence that you can service both properties. If an assumption changes, have the lender confirm the revised position in writing before you commit.

Compare it with the alternatives

Selling first gives you a clearer budget and removes the risk of owning two homes, but it may create temporary accommodation and storage costs. Use the moving and storage guide so those costs are visible in the comparison rather than treated as an inconvenience with no price attached.

Aligned settlements reduce the gap but create a settlement chain. A longer settlement on your sale may give you more time to buy, while a purchase conditional on selling may be less attractive to the other homeowner. Each route moves the risk, so compare the practical cost and pressure as well as the finance cost.

If you already have a fixed loan, also ask whether a mortgage security transfer could be relevant. It is not the same as automatic loan approval, but checking portability, break costs and settlement timing can make the comparison more complete.

Keep the decision team small and clear

Your lender or adviser checks affordability and lending. Your lawyer checks the agreements and dates. Settled recommends having your lawyer or conveyancer review the sale and purchase agreement before you sign it. Your agent helps you understand the likely sale process and buyer response. None of those roles replaces the others.

Before signing a purchase agreement, make sure each professional is working from the same sale price, loan amount and settlement dates. A plan that works only when every assumption is perfect is not yet a reliable moving plan.

Keep the final approvals, assumptions and expiry dates together. If the expected sale price or a settlement date changes, take that change back to the lender and lawyer before agreeing to it. A plan that depends on every assumption being perfect is not ready to use.