Moving house
Bridging finance covers the gap when you buy your next home before the sale of your current one has settled. It solves a timing problem, but it comes with real risk if the sale takes longer or sells for less.
By Yatin Kainth, Financial Adviser. Last reviewed
Bridging finance is short-term lending that lets you buy a new home before your existing one sells. The bank lends against both properties for a limited time, then the sale proceeds pay the bridge off. It suits people with solid equity and a realistic sale price, and it’s riskier when the old home isn’t sold yet.
For a while you own two homes. The bank lends enough to settle the new purchase, secured over both properties. When your old home sells, the proceeds repay the bridging loan and you’re left with the mortgage you planned on the new home.
During the bridge you’re carrying the costs of both properties. Some lenders let the bridging interest add to the loan instead of paying it monthly, which helps cash flow but grows the balance.
| Closed bridge | Open bridge | |
|---|---|---|
| Your current home | Sold unconditionally, waiting to settle | Not sold yet |
| Risk | Lower, because the sale price and date are known | Higher, because price and timing are unknown |
| Lender appetite | More lenders will consider it | Fewer lenders, and they’ll want strong equity and a sale plan |
The biggest risk is selling for less, or later, than you hoped. Every extra month costs interest, and a lower price means a bigger loan left on the new home. I suggest building in a buffer on the sale price and talking to your agent about timing before you commit. If you’d rather avoid the risk, the alternative is to sell first, or buy with a long settlement date.
For the timing of offers and conditions, see what happens after your offer is accepted.
It’s short term, usually limited to months rather than years, and the limit is set by the lender. A closed bridge is typically only needed until your sale settles.
Sometimes. That’s called open bridging, and fewer lenders offer it. You’ll need good equity, affordable end debt and a realistic sale plan.
The rate is often similar to or a bit above normal home loan rates, but you’re paying interest on two properties for a while, and there may be extra fees. The total depends on how long the bridge runs.
You’d need to talk to the lender about extending the bridge or reducing the price. That’s why a conservative sale price and a buffer matter before you buy.