Bridging Finance: Buying Before You Sell Without Carrying Both

Peak debt and capitalised interest

During the bridging period, the borrower's total exposure (existing loan plus new loan plus the bridging facility) is referred to as peak debt. The lender sets a peak debt cap based on the expected proceeds from the sale of the existing property, plus the borrower's serviceability on the end debt (the residual loan that remains after the sale).

Most Australian lenders allow bridging interest to be fully capitalised during the bridging period, meaning the borrower does not need to make repayments during the bridge. The interest is added to the peak debt and cleared on settlement of the existing property. Capitalisation is conditional on adequate equity to support the higher debt position.

The borrower's serviceability is generally assessed against the end debt only, not the peak debt, provided the lender is satisfied the existing property can sell within the bridging window at or above the value they have approved. This is why bridging is often viable for borrowers who could not service two loans simultaneously on a standard assessment.

Selling timeframe and lender appetite

Lenders typically require the existing property to settle within a defined bridging window. Six months is common at major banks; some non-bank lenders extend to twelve months or longer. The window starts from the date of the bridging facility, not from the date the existing property is listed.

Inside the window, the borrower retains flexibility on the sale process. Outside the window, the lender can charge penalty interest, demand repayment, or in extreme cases, force the sale. The right window length is a matter of matching the borrower's selling strategy to the lender that offers the appropriate timeframe.

Lender appetite for bridging in 2026 has broadened relative to previous years, with several non-bank lenders entering the segment with more flexible policy. Bridging interest rates typically start from around 6.00% p.a. as of early 2026, varying by LVR, lender, and whether the bridge is open or closed, subject to lender criteria.

The risks worth pricing

Three risks shape the structural design of a bridging facility:

• Sale price falling short of expected: if the existing property sells for less than the lender approved against, the residual end debt can exceed what the borrower can service. This is the most common bridging failure mode.
• Sale taking longer than the bridging window: capitalised interest accrues on a higher debt base for longer; penalty interest may apply; the lender may demand a price reduction or force action.
• Stamp duty exposure on the new purchase: stamp duty is payable on the new purchase regardless of whether the existing one sells. Households without the cash to fund stamp duty separately need to ensure the bridging facility accommodates it.

How Maxfin structures bridging files

The firm starts with the end-debt position. If the borrower cannot service the residual loan after the sale, the bridge is the wrong tool regardless of how generous the peak-debt approval looks.

Lender selection is then matched to the borrower's selling strategy. A borrower who has already listed and expects sale within ninety days has different optimal lenders to one who needs nine months to ready a property and stage a campaign.

Maxfin coordinates the valuation strategy carefully. The lender's valuation of the existing property determines peak debt headroom and capitalisation capacity. A weak valuation can compromise the entire structure even when the rate-card approval looks fine.

The closing recommendation is to keep a cash buffer outside the facility for unexpected stamp duty shortfalls, prolonged sale, or settlement-day surprises. Bridging facilities are calibrated to expected outcomes; the buffer absorbs the difference between expected and actual.