How Does a Bridging Loan Work When You Buy Before You Sell?

Introduction

In property, timing is everything. Especially in high-demand suburbs like Dover Heights and Vaucluse where homes can sell before they even hit the market. A recent client of ours faced a challenge: they had found their ideal new home but hadn’t yet sold their current property. Rather than risk losing the opportunity, they acted quickly. With our help, they secured a $2.2 million bridging loan that let them buy first and sell later, without unnecessary financial pressure.

At Innovate Funding, we specialise in smart lending solutions just like this. If you're wondering whether it's possible or safe to buy a property before selling your existing one, this blog will walk you through exactly how it works using a real-life example.

What Is a Bridging Loan?

A bridging loan is a short-term loan that helps you cover the cost of buying a new property before you've sold your current one.

Here’s how it works in simple terms:

• You take out a temporary loan to fund the purchase of your new home.

• The loan is secured against your current home, your new home, or both.

• When you sell your current home, the proceeds are used to repay the loan.

• During the loan period, you usually only pay interest, not the full loan repayments.

Most bridging loans last between 3 to 12 months, giving you enough time to sell your existing home and transition smoothly.

Case Study: $2.2 Million Bridging Loan in Dover Heights and Vaucluse

The Client’s Situation

The client had found a high-end home in Sydney's eastern suburbs between Dover Heights and Vaucluse. Properties like this don’t stay on the market long.

But they hadn’t sold their existing home yet. They were concerned about losing the new home if they didn’t act quickly. They came to Innovate Funding looking for a way to secure the new property without waiting for the sale of their current one.

The Solution: A Consumer Bridging Loan

We provided a $2.2 million consumer-purpose bridging loan with the following features:

• Loan Amount: $2.2 million

• Interest Rate: 7.75% per annum

• Loan Term: 6 months with flexibility to extend if needed

• Repayments: Interest-only

• Security: First mortgage over both the new and current properties

• Exit Strategy: Sale of the current home

This allowed the client to purchase the new home confidently and settle quickly, without the pressure of a rushed sale.

Why Clients Use Bridging Loans

Bridging loans are useful for many reasons:

• You can buy first and sell later, without missing out on opportunities.

• You avoid moving into temporary accommodation between sales.

• You can take your time selling your current home, which helps you get the best possible price.

In competitive markets like Sydney’s east, bridging loans give buyers the flexibility to act fast without making risky decisions.

Understanding the Costs: Why a 7% Interest Rate May Still Make Sense

Traditional home loans usually have lower interest rates, often between 5 and 6 percent. Bridging loans are different. They are short-term loans, and the interest rates are usually between 7 and 9 percent.

That might sound high, but here’s why it can still make sense:

• The loan is short-term, so you only pay interest for a few months.

• You pay interest only, not full repayments, during the loan term.

• It allows you to move quickly, which can result in better long-term financial outcomes.

In our client’s case, the ability to secure the property quickly was far more valuable than the temporary cost of the loan interest.

What Lenders Look For in a Bridging Loan Application

Lenders will assess several things before approving a bridging loan:

1. A clear exit strategy: You need a plan for how you’ll repay the loan. Most often, this is through the sale of your current home.

2. Property valuations: The lender will look at the market value of both your current and new homes to ensure the loan is secure.

3. Your ability to pay interest: Even though repayments are interest-only, the lender must be confident you can meet those payments during the loan period.

4. A realistic timeline: You should be able to sell your property within the agreed timeframe, usually 3 to 12 months.

FAQs About Consumer Bridging Loans in Australia

1. Can anyone get a bridging loan?

Bridging loans are available to both homeowners and investors. Approval depends on your financial situation, how much equity you have, and your plan for repaying the loan.

2. How long does a bridging loan last?

Most bridging loans last from 3 to 12 months. Some lenders may allow extensions, but you should aim to sell your home within the original term.

3. Do I have to pay two mortgages at once?

No. With a bridging loan, you usually only pay the interest on the new loan. You don’t make full repayments on both loans.

4. What happens if I can’t sell in time?

It’s important to plan your sale carefully. If your home doesn’t sell in time, the lender may offer an extension or you may need to refinance. Having a good broker or lender who plans for this can help reduce the risk.

5. Can I get a bridging loan from a non-bank lender?

Yes. Non-bank lenders like Innovate Funding specialise in bridging loans and often provide faster approvals and more flexible terms than traditional banks.

What Made This Bridging Loan a Success?

Here’s why this particular deal worked well:

• The loan was approved and settled quickly, which allowed the client to secure the new home without delay.

• Interest-only repayments made the loan affordable in the short term.

• The client had a clear exit strategy and sold their existing property within 60 days.

• We provided hands-on support from start to finish.

Should You Consider a Bridging Loan?

If you’ve found your ideal home but haven’t sold your current one, a bridging loan might be the right tool. It gives you the flexibility to:

• Move forward without rushing the sale of your existing property

• Avoid the stress of multiple moves

• Take advantage of buying opportunities when they come up

However, it’s important to work with a knowledgeable lender and to have a strong plan in place. Every situation is different, and professional advice is key.

Why Choose Innovate Funding?

At Innovate Funding, we provide:

• Fast approvals and flexible loan structures

• Personalised service tailored to your situation

• Clear communication from beginning to end

• Experience in both consumer and commercial lending

We help Australian homeowners and investors access smart, short-term finance that supports their goals and timelines.