Bridging Loan
A short-term loan that allows you to purchase a new property before selling your existing one. Typically more expensive than standard home loans.
Plain-English definition. A bridging loan is a short-term home loan that funds the purchase of a new property before your existing one has sold, "bridging" the gap until settlement of the sale.
How it works in Australia. Lender products vary. A lender may calculate "peak debt" from the existing loan, new purchase and costs, then calculate "end debt" after expected net sale proceeds. Interest may be paid during the bridging period or added to the balance, depending on the product and assessment. Do not assume a universal term, rate loading or capitalisation method. ASIC's Moneysmart bridging finance definition provides a neutral overview.
Illustrative example. An owner has a $300,000 mortgage and buys a $1.2 million home before selling. If purchase costs are $60,000, the starting combined debt is $1.56 million before any interest treatment or cash contribution. If the former home later provides $875,000 of net sale proceeds, subtracting that amount would leave $685,000 before capitalised interest and lender adjustments. This is arithmetic only, not a lender assessment or product quote.
Common confusion. The expected sale price, sale timing, selling costs, interest treatment and lender valuation can all change the end debt. A delayed or lower sale can increase the balance that remains. Obtain current product terms and licensed credit assistance before relying on a bridging scenario.