How does a bridging loan work?
How does a bridging loan work?
A bridging loan allows you to purchase a new owner occupied property before selling your existing property. Your existing property, whether it has a home loan that is refinanced into the Bridging Loan or is provided as additional security if it is mortgage-free, is used together with your newly purchased property to support the loan.
During the bridging period of up to 12 months, monthly interest charges are capitalised to the loan balance, which means you are not expected to make payments during your bridging period. Once your existing property is sold, the sale proceeds are used to reduce your loan balance, and the remaining loan converts to a standard variable home loan on principal and interest repayments, secured by your new property.
How do you calculate bridging loan repayments?
Your bridging loan repayment estimate is based on several key factors. When you use the Bridging Loan Calculator, the following details will help you understand how much you may be able to borrow and what your loan could look like once your existing property is sold:
- Current property value: The estimated sale price of your existing home.
- Current home loan balance: The amount still owing on your existing mortgage.
- New property purchase price: The price of the home you're looking to buy.
- Selling and buying costs: Costs such as stamp duty, legal fees, agent fees, and cash out.
- Interest rate: The interest rate applied to your bridging loan.
A bridging loan involves two important figures:
- Peak debt: The maximum amount owing during the bridging period while you own both properties.
- End debt: The remaining loan balance after your existing property is sold and the sale proceeds have been applied.
The interest during the bridging period is capitalised, meaning it is added to your loan balance rather than requiring regular repayments while you're waiting for your property to sell.
Based on the information provided, our Bridging Loan Calculator will calculate an estimated peak bridging loan amount, your estimated loan once your old home sells, and your estimated ongoing repayment.
Bridging loan FAQs
A Bridging Loan is a type of loan that helps you finance a new home purchase now, while you work to sell your old one within a ‘bridging’ period of up to 12 months, starting from when you settle your new property.
Yes. Interest will be calculated and charged on your loan throughout the bridging period of up to 12 months. During this time, the monthly interest charges are capitalised to your loan balance, which means interest added to your loan limit owing rather than being paid separately via a monthly repayment. As a result, you won't need to make repayments during the bridging period, and the amount of interest charged will be included in your outstanding loan balance.
Peak debt is the highest amount you owe during your bridging loan. It includes your existing home loan balance (if any), the purchase price of your new property, any costs added to the loan (such as stamp duty and legal fees), the applicable bridging loan fee, and any interest added to the loan before your current property is sold.
End debt is the amount remaining after your current home is sold and the sale proceeds are applied. This becomes your ongoing home loan balance. If you're downsizing, the sale proceeds may be enough to repay the loan in full, resulting in no end debt.
If you sell your existing property before the end of the bridging period, the sale proceeds will be used to reduce your loan balance (the peak deeabt). Once the sale has settled and your peak debt is reduced with the proceeds, your Bridging Loan will convert to a standard variable home loan secured by your new property only. You'll then begin making principal and interest repayments on the remaining loan balance in accordance with your loan contract. There are no early repayment fees for completing your bridging period prior to the maximum 12 months allowed. However, if you're downsizing and there is no end debt remaining once the sale proceeds have been applied, a standard loan discharge fee will apply.
When your current home sells, the proceeds are applied to your balance. What’s left is your end debt, which becomes a standard variable home loan with us.
From that point you’ll have access to your home loan through our Smart Money app where you'll make normal principal and interest repayments on the remaining balance.
If your sale proceeds cover the balance in full, the loan is closed out and there’s nothing further owing.
Bridge the gap to your next home
Moving home doesn't have to mean waiting for your current property to sell. Our friendly home lending specialists make it easy to explore your Bridging Loan options. Get started online today, or give us a call if you prefer.
The benefits of our Bridging Loan
Bridging period up to 12 months
Buy now, sell your old home later
Sell your current property at any time within the bridging period
Live in your old property until your new home settles
Mary-Anne
Kathryn
Lending Specialist
Real people, based in Brisbane, Australia
Our experienced home lending specialists are here to help. Let's chat about your home loan options today.