Bridging finance: buy first, sell after
A bridging loan lets you buy your next home before you've sold the one you're in. For a few months you carry both: the lender lends against both properties, the interest is usually added to the loan rather than paid monthly, and when your old home sells the proceeds pay the bridging part down. What decides whether it works is two numbers, the debt at its peak and the debt left at the end, and what happens if the old place takes longer to sell.
Closed and open bridging: the difference that matters
Closed bridging. Your old home has already sold, with a settlement date, but it settles after you need to buy. The end of the bridge is known, so the risk is small and more lenders will do it.
Open bridging. Your old home isn't sold yet. You don't know when it will sell or for how much, so the lender carries more risk and asks more of you. Firstmac, for example, requires the old home to be listed for sale before the new purchase settles.
Peak debt and end debt, worked through
An illustration, not a client file. You own a home worth $900,000 and owe $300,000 on it. You buy a new home for $1,100,000, with $50,000 of purchase costs. On the day you buy, you owe $300,000 + $1,100,000 + $50,000 = $1,450,000.
For six months, no repayments are made. At Firstmac the first three months are interest free, with an upfront fee added to the loan instead; interest for months four to six is added to the loan. At an illustrative 7% a year, those three months come to about $25,500, so the debt peaks at about $1,475,500, plus the upfront fee. That's the peak debt: about 74% of the two homes' combined $2,000,000.
Your old home then sells for $900,000, and after $25,000 of selling costs, $875,000 goes to the loan. What's left, about $600,500 plus the upfront fee, is the end debt: your new home loan, about 55% of the new home's value.
Why the lender assumes your home sells for less
Lenders don't test the end debt on the price you expect. Firstmac's published policy tests it assuming the home being sold fetches 20% less than its value. In the example, that's $720,000, not $900,000, which leaves a tested end debt of about $755,500 plus the upfront fee, around 69% of the new home's value. Firstmac caps both the peak debt and the tested end debt at 80% of the value.
If your plan only works at the full price, it may not pass that test, and it's the test that decides the approval.
What it costs while both loans are running
Interest on the peak debt, usually added to the loan rather than paid each month. At Firstmac the first three months are interest free; after that, every extra month the old home takes to sell adds to what you owe.
An upfront fee, added to the loan in place of the first three months' interest. It isn't refunded if the bridge ends within those three months, so selling quickly doesn't get it back.
A fixed rate during the bridge at Firstmac, which switches to variable afterwards.
Two sets of property costs: rates, insurance and upkeep on both homes until the sale settles.
How long you get, and what happens at the end
A bridging loan has an end date, set at the start. Firstmac's bridge period is 6 or 12 months, chosen at the outset, and its policy names no extension.
The choice between them is about more than time. On a 6-month bridge, Firstmac adds all the interest to the loan and doesn't assess whether you can make repayments during the bridge. On a 12-month bridge, months 7 to 12 need monthly interest-only repayments on the peak debt, and you have to show you can afford them. Choosing 12 months for comfort brings a test that 6 months avoids.
If your old home doesn't sell
This is the question to answer before you start, not after. The interest keeps adding to the debt while the home sits unsold, and when the bridge period ends, the bridging part still has to be repaid. That can mean cutting the asking price to sell in time.
Before you commit, work out the lowest price you'd accept and check that the end debt still works at that price, and how many extra months of interest you could carry.
Selling first, buying first, or bridging
Sell first. You know exactly what you have to spend and carry no bridging cost. The risk is finding the next home in time, and you may need to rent in between.
Buy with a longer settlement, or subject to sale. A long settlement on the new home, or a purchase that depends on selling yours, can line the two up without a bridging loan. Sellers don't always accept those terms.
Bridge. You can buy the right home when it comes up. You pay for that with interest, fees and the risk of a slow sale.
What a lender wants before approving a bridge
Valuations of both homes.
Evidence of the sale, or that the old home is listed, for open bridging.
A clean credit record. Firstmac sets a minimum credit score of 700 for the borrower with the highest income.
Mortgages over both properties. At Firstmac, any loan on the home being sold must be moved to Firstmac, settling at the same time as the purchase.
The right location. Firstmac bridges only in the postcodes it rates most highly, which rules out much of the country.
The new home must be the one you'll live in, at Firstmac. The one you're selling can be your home or an investment.
Bridging when you're downsizing or retired
Bridging can suit someone downsizing, where the sale clears most or all of the debt. Because a 6-month bridge at Firstmac adds all the interest to the loan and doesn't test repayments during the bridge, what matters most is the end debt and whether your income covers it. If the sale leaves no end debt, the loan simply ends with the bridge.
Bridging finance questions
It lets you buy your next home before you sell the current one. The lender lends against both, the interest is usually added to the loan, and the sale of your old home pays down the bridging part.
Buying before you sell?
Tell me what your current home is worth and what you owe, what you're buying and for how much, and whether your home is sold or listed. I'll work out your peak and end debt, test it the way a lender will, and tell you which lenders would bridge it.
You'll hear back within the hour in business hours, and by 9am the next business day after hours.
Sources
- 1
Firstmac, Residential Lending Policy, section 32 (bridging), changelog to 28 July 2026. Read 27 August 2026.
- 2
The illustration: Money Brain's arithmetic on the stated example (7% a year, illustrative, monthly compounding, interest for months four to six only).
Updated 2 October 2026