Bridging loans: how to buy before you sell

Buying and selling at the same time is the single trickiest piece of choreography in the property market. The home you want comes up before yours is sold; or yours sells fast and you can't find a replacement in time. A bridging loan is the lender's answer to that timing problem — and it's worth understanding before you need one.

What a bridging loan actually is

A bridging loan is a short-term facility that funds the new property while you still own (and owe on) the old one. The lender effectively rolls both debts into a single position called your peak debt: existing mortgage balance + new purchase price + stamp duty and costs.

You pay interest only on peak debt until your existing property sells. The sale proceeds then drop the balance down to your end debt — what you owe on the new home — which converts to a standard variable or fixed loan.

Why borrowers use it

• Don't miss the right property. You can make a clean offer that isn't subject to your sale, which most vendors prefer.
• Skip the rental gap. No need to move twice or live in a short-term lease while you wait.
• Use the new home as leverage. Some lenders will accept a longer settlement on the sale-side once they see the bridge in place.

What it costs

Bridging rates run slightly above standard variable — usually 0.5–1.0% higher — and most facilities cap at 6–12 months. A handful of lenders let interest capitalise (so your repayments don't change during the bridge), but most expect interest-only payments on peak debt.

The hidden cost is your sale assumption. Lenders size your bridge on the expected sale price of the existing property. If it sells for less, you cover the shortfall.

When it's a fit — and when it isn't

Bridging works well when you have real equity in the existing property, a credible sale plan, and a defined timeline. It's a poor fit if you're hoping the market will lift to make the numbers work, or if you can't service peak debt for at least three months without stress.

We model both scenarios — bridging vs. sell-then-buy — side by side before recommending one. A 30-minute call usually settles the question.