Bridging loans: how they work, peak debt and end debt
A bridging loan lets you buy your next home before you sell your current one. For a short bridging period, up to 12 months at most of the lenders we checked, you owe both your existing loan and the loan for the new home (your peak debt). When the old home sells, the proceeds pay the loan down to your end debt, which carries on as an ordinary home loan. In our example, selling for $800,000 and buying for $1,000,000 in NSW leaves an end debt of about $550,247.
This guide explains peak debt and end debt with a worked example, how interest works while you own both homes, what five lenders' bridging loans look like, what happens if the sale takes longer or fetches less, and the alternatives. The calculator below works out your own figures.
By Better Rate Mate Editorial Team · Last reviewed
Bridging loan calculator
Enter what your current home should sell for, what you owe, the new home's price and costs, and how long the sale may take, to see your peak debt, the bridging interest and your end debt.
Bridging loan calculator
Peak debt, the interest while you own both homes, and the end debt once you sell.
Peak debt
$1,295,000
72% of the two homes' combined value
End debt after the sale
$555,866
56% of the new home's price; about $3,415 a month over 30 years
Over 6 months about $40,866 of interest is added to the loan, taking it to $1,335,866 before the sale. The sale nets $780,000 after selling costs.
A guide, not a quote. Assumes the rate doesn't change, interest compounds monthly when it's capitalised, and the end debt is repaid with principal and interest over 30 years. Lenders assess bridging loans on your peak and end debt and your income, and each sets its own limits and fees.
Stamp duty calculator: the duty on your new home in every state
What is bridging finance?
Bridging finance covers the gap between buying and selling: for a while you carry the loan on your current home and the loan for the new one. NAB describes bridging loans as usually available for a set time, often up to 12 months, with repayments commonly interest-only while you own both properties. Once your current home sells, the sale proceeds reduce the debt.
Lenders assess two figures: the peak debt, which you owe while you hold both homes, and the end debt, which is left after the sale. NAB says loans are typically capped at a percentage of the two properties' combined value, often 80%, so you need equity in your current home to make it work.
Peak debt and end debt: a worked example
Peak debt is what you owe on your current home plus the cost of the new one, less any cash you put in. Here that is $1,289,552: $250,000 still owing, a $1,000,000 purchase and $39,552 of NSW stamp duty and titles fees. If interest is capitalised for six months it adds about $40,695. The sale then nets $780,000 after an example $20,000 of selling costs, leaving an end debt of $550,247.
If the interest is paid monthly instead, the repayments are about $6,695 a month while you own both homes, and the end debt is $509,552. If the home sells for $720,000, 10% less than hoped, a capitalised loan leaves $630,247.
| Step | Amount |
|---|---|
| Owing on the current home | $250,000 |
| New home price | $1,000,000 |
| NSW stamp duty and titles fees on the new home | $39,552 |
| Peak debt (no cash put in) | $1,289,552 |
| Interest added over 6 months at 6.23% | $40,695 |
| Debt just before the sale | $1,330,247 |
| Sale price less $20,000 of selling costs | $780,000 |
| End debt (your new home loan) | $550,247 |
| End debt as a share of the new home's price | 55% |
| Repayment on the end debt over 30 years | $3,381 a month |
How interest works during the bridging period
Lenders handle the interest on the peak debt in one of two ways, and some offer both:
- Capitalised: no repayments while you bridge; the interest is added to the loan, and the sale proceeds repay it. Westpac's bridging loan works this way, and Bankwest offers it as an option. Your cash flow is easier, but the debt grows every month the sale takes.
- Interest-only repayments: you pay the interest each month, as CommBank and ANZ describe, which keeps the debt from growing but means meeting repayments on the whole peak debt while you may also be paying to sell and move.
Bridging loans at five lenders
Bridging periods, how interest is handled and the limits, as each lender describes them. We don't quote rates: ANZ, for example, says its bridging loan uses the same standard variable rate as its ordinary home loans.
| Lender | Bridging period | Interest while you own both homes | Limits and other terms |
|---|---|---|---|
| ANZ | Up to 12 months from settling on the new home to sell and settle the current one | Interest-only repayments | May lend up to 80% of the new property's value; ANZ says the term generally can't be extended past 12 months |
| Bank Australia | Up to 12 months | Interest calculated daily and repaid with the amount borrowed at the end of the term | LVR of 75% or less |
| Bankwest | Usually up to 6 months | Capitalised (no repayments) or interest-only monthly | Only with a Bankwest Simple Home Loan; your existing loan must be with Bankwest or refinanced to it |
| CommBank | Maximum term of 12 months | Interest-only payments | Maximum loan based on both properties, your borrowing capacity and the LVR; if the home isn't sold in time, steps may include a higher default rate |
| Westpac | Up to 12 months | Interest capitalised: no repayments during the bridging period | An extension past 12 months may be possible, subject to credit criteria |
How much can you borrow on a bridging loan?
It depends on the equity in both homes and your income. NAB says bridging loans are typically capped at a percentage of the combined property value, often 80%; ANZ says it may lend up to 80% of the new property's value, and Bank Australia sets an LVR of 75% or less. CommBank bases the maximum on both properties, your borrowing capacity and the LVR.
Your income still has to support the loan: the lender must assess that it isn't unsuitable for you, which includes the end debt you'll carry once the bridging period is over. Our borrowing power calculator gives an indicative range.
What happens if your home doesn't sell in time?
Bridging loans have a hard end date. CommBank says you need to sell within the 12-month term, and if you don't, its next steps may include helping arrange the sale, charging a higher default interest rate, or removing any discretionary discount from the rate. ANZ says its bridging loans generally can't be extended past 12 months. Westpac says an extension may be possible, subject to credit criteria.
Plan for it before you buy: price the old home realistically, get an agent's appraisal, and run the calculator with a longer bridging period and a lower sale price to see what you'd owe.
The downsides of a bridging loan
The costs and risks to weigh before you buy first:
- Interest on two homes' worth of debt for as long as the sale takes; ANZ points out that the longer it takes to sell, the more interest you pay
- A sale price below what you planned leaves a bigger end debt; NAB notes you may need to cover a shortfall
- Capitalised interest grows the debt month by month
- Fees: some lenders charge establishment, account and discharge fees on the bridging loan as well as the end loan
- A deadline: if the home hasn't sold when the term ends, you may pay a higher rate or have to sell on the lender's timetable
Alternatives to a bridging loan
A bridging loan suits someone confident their home will sell for close to its expected price within months. Other ways to manage the gap:
- Sell first, then buy: no bridging interest, but you may need to rent or negotiate a longer settlement
- Buy with a longer settlement, or ask the seller for a contract that's subject to the sale of your home (a seller may not accept it)
- Negotiate a longer settlement on the home you're selling, so both settle close together
- Use the equity in your current home for the new deposit, if you can afford both loans without the sale
Budget for stamp duty on the new home
Stamp duty is part of the peak debt unless you pay it from savings. Work out the duty in your state: NSW stamp duty calculator · VIC stamp duty calculator · QLD stamp duty calculator · WA stamp duty calculator · SA stamp duty calculator · TAS stamp duty calculator · ACT stamp duty calculator · NT stamp duty calculator.
What to watch for
- A sale price based on hope rather than an appraisal: the end debt is only as good as the sale.
- Capitalised interest, which grows the debt every month the sale takes.
- The end date: whether the lender can extend the term, and what rate applies if it does.
- Fees on both the bridging loan and the end loan.
- Whether your income supports the end debt on its own.
Common questions
What is a bridging loan?
A short-term home loan that lets you buy your next home before you sell your current one. You owe both loans (the peak debt) during a bridging period of up to 12 months at most of the lenders we checked, and the sale proceeds pay it down to the end debt.
How much can you borrow on a bridging loan?
It depends on the equity in both homes and your income. NAB says loans are typically capped at a percentage of the combined property value, often 80%; ANZ may lend up to 80% of the new home's value; Bank Australia sets an LVR of 75% or less.
How much interest do I pay on a bridging loan?
It depends on the peak debt, the rate and how long the sale takes. In our example, a peak debt of $1,289,552 at 6.23% adds about $40,695 of interest over six months if it's capitalised, or about $6,695 a month if you pay it as you go.
What are the downsides of a bridging loan?
You pay interest on both homes' debt until the sale settles, the debt can grow if interest is capitalised, a lower sale price leaves a bigger end debt, and the loan has a deadline: if the home hasn't sold in time you may pay a higher rate or have to sell quickly.
How do you calculate a bridging loan?
Peak debt = what you owe on your current home + the new home's price and buying costs − any cash you put in. Add the interest for the bridging period if it's capitalised. End debt = that amount − the sale price after selling costs. The calculator on this page does it for you.
What are the interest rates for bridging loans in Australia?
We don't quote lenders' rates. Some lenders price bridging loans like their ordinary variable home loans: ANZ, for example, says its bridging loan uses the same standard variable rate. Ask for the rate on both the bridging loan and the end loan, and compare the comparison rates for your amount.
How long can a bridging loan last?
Usually up to 12 months: CommBank, ANZ, Westpac and Bank Australia all describe terms of up to 12 months, and Bankwest says usually up to 6 months.
Can you get a bridging loan with a different bank?
Usually the bridging lender wants both loans. Bankwest, for example, needs your existing home loan to be with Bankwest or refinanced to it. Ask the lender whether it will refinance your current loan as part of the bridging loan.
About rates on this page
We don't quote lenders' interest rates: they change daily and with every RBA decision, and we don't have a live rate feed. The averages we quote are the RBA's published figures for the month shown. Always get the lender's key facts sheet, which shows the rate and comparison rate for your loan amount.
