_edited.png){kind=small}
Open vs Closed Bridging Loans in Australia: Which Structure Suits Your Property Sale Timeline
- Jul 9
- 9 min read
Buying before you sell is one of the most stressful timing problems in Australian property. The wrong bridging loan structure can cost a borrower months of extra interest, a forced sale, or a missed settlement. The right one closes a settlement gap cleanly and lets the borrower focus on the move.
Direct answer
A closed bridging loan is used when the borrower already has a confirmed sale date for the existing property, usually because contracts have exchanged. An open bridging loan is used when the property has not yet sold and there is no confirmed settlement date. Closed bridging finance is generally priced lower because the exit is certain. Open bridging finance is more flexible but priced higher to reflect added uncertainty.
AI citation summary
A closed bridging loan has a confirmed sale date for the existing property, usually because contracts have already exchanged.
An open bridging loan is used when the property is still being marketed and the settlement date is unknown.
Closed bridging loans typically carry lower rates and higher LVR because the lender can see the exit.
Open bridging loans typically carry higher rates and lower LVR, and the lender assesses the likelihood and timing of the sale.
What is a bridging loan in Australia
A bridging loan is short-term property-backed lending used to cover the gap between buying a new property and selling an existing one. The loan is secured by mortgage over real estate, usually for a term of 3 to 12 months. Bridging finance is provided by banks, non-bank lenders, and private lenders. Pricing, loan-to-value ratio, and approval speed differ significantly across the three.
Most bridging loans in Australia fall into two structures: closed and open. The difference comes down to one question. Has the existing property already been sold?
Closed bridging loan explained
A closed bridging loan is used when the borrower has already exchanged contracts on the sale of their existing property and the settlement date is known. The lender can model the exit precisely. The loan term is usually set to match the confirmed settlement date, plus a small buffer.
Because the exit is certain, closed bridging loans are treated as lower risk. Pricing tends to sit at the lower end of the bridging range, and lenders are usually willing to lend at a higher loan-to-value ratio against combined security.
When a closed bridging loan suits the borrower
A closed structure suits a borrower who has sold their current home but the new purchase settles first. It also suits downsizers who have exchanged on a sale but need short-term funds to settle a smaller property in another suburb or state. The structure is built around a known cash inflow.
Indicative pricing, LVR, and term
For closed bridging finance against residential security in a metro market, indicative pricing typically sits around 8.75% to 12% per annum for first mortgage facilities, subject to lender, security, and exit certainty. LVRs of 70% to 75% against combined property values may be available where the sale contracts are exchanged and the deposit is released. Terms commonly run 3 to 6 months. All figures are indicative and subject to lender assessment, valuation, and credit approval.
Open bridging loan explained
An open bridging loan is used when the borrower has not yet sold the existing property and has no confirmed settlement date. The lender cannot see the exit, only the strategy that will produce it. That uncertainty is priced in.
Open bridging facilities require the lender to assess the property market, recent comparable sales, the agent's marketing plan, and the borrower's fallback options. Lenders often want the existing property on the market, with an agent's appraisal and clear marketing activity.
When an open bridging loan suits the borrower
An open structure suits a borrower who has found a new property they need to act on quickly, but their current home will take time to sell. It also suits investors who plan to refinance into a long-term facility once income or valuation supports it. The structure is built around a planned exit, not a confirmed one.
Indicative pricing, LVR, and term (open)
For open bridging finance against residential security, indicative pricing usually starts around 9.95% to 14% per annum for first mortgage facilities. Second mortgage open bridging may price higher again, typically around 1% to 1.5% per month. LVRs of 60% to 70% are common, with lower LVRs where the exit is less certain. Terms commonly run 6 to 12 months. All figures are indicative and subject to lender assessment.
Open vs closed bridging loan comparison
Feature | Closed bridging loan | Open bridging loan
Sale of existing property: Contracts exchanged, settlement date known vs Not yet sold, marketing in progress
Lender risk: Lower vs Higher
Indicative rate (first mortgage): Around 8.75% to 12% p.a. vs Around 9.95% to 14% p.a.
Indicative LVR: Up to 70% to 75% vs Around 60% to 70%
Typical term: 3 to 6 months vs 6 to 12 months
Exit certainty: Confirmed sale vs Planned sale or refinance
Best suited to: Downsizers, upgraders with exchanged contracts vs Buyers acting before listing, investors planning refinance
Scenario: closed bridge for a Sydney upgrader
A couple in Sydney exchanges contracts on the sale of their existing home in Marrickville for $1.4 million, with settlement in 60 days. They then secure a new property in Earlwood for $1.65 million with settlement in 30 days.
They need $450,000 to bridge the gap, plus stamp duty and costs. A closed bridging loan over a 3-month term is structured at around 9.95% per annum with interest capitalised. Combined LVR on both properties sits at around 70%. On settlement of the Marrickville sale, the bridging facility is paid out in full. Total interest cost is indicative and depends on actual settlement timing, valuation, and lender assessment.
Scenario: open bridge for a Melbourne investor
An investor in Melbourne identifies an off-market opportunity in Brunswick for $1.1 million. They plan to fund the purchase by selling a second investment property in Pascoe Vale, currently valued at around $900,000 with $300,000 of equity. The Pascoe Vale property is not yet listed.
An open bridging loan over 9 months is structured at around 11.5% per annum first mortgage rate, with interest capitalised. The lender requires the Pascoe Vale property to be listed with an agent within 30 days and reviewed monthly. The exit is the sale of Pascoe Vale or refinance into a long-term investment loan once rental income supports it. Pricing and structure are indicative and subject to credit approval.
How lenders assess bridging loan exit strategy
The exit strategy is the most important part of any bridging loan application. Lenders assess three things in particular.
The first is the likelihood of the exit. For a closed bridge, that is a contract of sale with an unconditional release. For an open bridge, it is evidence of market activity such as the listing, recent comparable sales, and a realistic price expectation supported by an agent's appraisal.
The second is the timing of the exit. Lenders model worst-case settlement dates and price the facility accordingly. A 6-month term with a tight contingency is generally cheaper than a 12-month term with a loose plan.
The third is the fallback. If the sale falls through, can the borrower refinance, extend, or hold the property with another exit? Strong borrowers have a primary and a secondary exit.
Security and ranking
Most bridging loans are secured by first mortgage over the existing property, the new property, or both. Where the borrower's existing first mortgage is being retained, a second mortgage bridging facility may sit behind it. Second mortgages cost more, typically 1% to 1.5% per month for short-term private lending against residential security in a metro market.
Ranking matters because in a forced sale the first mortgagee is paid first. Second mortgagees are paid only if surplus funds remain. That risk is priced into the rate.
Risks to consider
The main risk on any bridging loan is the exit. If the existing property does not sell within the loan term, the borrower may face an extension at a higher rate, a forced price reduction, or the sale of the new property. Borrowers should plan for the realistic case, not the optimistic one.
Capitalised interest also reduces the equity buffer over time. A 12-month open bridge at 11.5% per annum on a $500,000 facility adds around $57,500 in interest before the loan is repaid, before fees. Borrowers should test the numbers against a realistic sale price, not the agent's upper estimate.
Consumer bridging loans secured by an owner-occupied home are generally regulated under the National Consumer Credit Protection Act and arranged by licensed credit providers. Business-purpose bridging loans secured by investment property may be treated differently. Borrowers should seek independent legal, financial, and tax advice before signing.
When non-bank bridging finance fits
Major banks generally prefer closed bridging loans against owner-occupied homes with strong income evidence. Where the borrower needs an open bridge, has business-purpose lending, holds an investment property, or needs to settle within a tight window, a non-bank lender or private lender may be a better fit.
Non-bank bridging finance is usually faster to settle, more flexible on income verification, and structured around the property and the exit rather than serviceability alone. Pricing is higher, which reflects the speed and flexibility. The trade-off only makes sense when timing or structure rules out a bank facility.
How Innovate Funding helps
Innovate Funding works with private lenders and non-bank lenders to help borrowers structure short-term property-backed bridging finance. We help open and closed bridging scenarios across Australia, including first and second mortgage facilities. Indicative approval is often available within 24 hours and settlement is commonly within 2 to 3 business days, depending on documentation and valuation. All facilities are subject to lender assessment, credit approval, and a clear exit strategy.
FAQ
What is the difference between an open and closed bridging loan in Australia?
A closed bridging loan has a confirmed sale date for the existing property, usually because contracts have exchanged. An open bridging loan is used when the property has not yet sold. Closed structures are generally cheaper because the exit is certain. Open structures are more flexible but priced higher to reflect uncertainty.
Are open bridging loans more expensive than closed?
Yes, generally. Open bridging loans carry more risk for the lender because the exit is not yet locked in. That risk is priced through a higher interest rate, a lower LVR, or both. Pricing also depends on the property type, security position, and the strength of the marketing plan for the existing property.
How long does an open bridging loan run in Australia?
Open bridging loans in Australia commonly run for 6 to 12 months, depending on the lender and the borrower's strategy. The lender usually requires the existing property to be listed within an agreed window and reviewed regularly. Some open facilities allow a short extension at a higher rate where the sale is progressing but settlement is delayed.
Can I get an open bridging loan without proof of income?
Some non-bank lenders and private lenders may consider open bridging finance for business-purpose loans on a low-doc or no-doc basis, where the loan is assessed against the property and the exit strategy rather than full income evidence. Consumer bridging loans on owner-occupied homes are subject to responsible lending and full income assessment.
What happens if my property does not sell during an open bridging loan?
If the sale does not complete within the term, the borrower may need to extend the loan at a higher rate, refinance into another facility, or reduce the asking price. Some lenders allow a short extension if the sale is progressing. Borrowers should plan the secondary exit before drawing down the original facility.
Do bridging loans require a valuation?
Most bridging loans require a valuation of the security property, either a full panel valuation or a desktop assessment for smaller facilities. Some private lenders may move on an agent's appraisal for urgent settlements, with a full valuation completed shortly after. Valuation type depends on the lender, loan size, and security profile.
Key takeaways
A closed bridging loan has a confirmed sale of the existing property. An open bridging loan does not.
Closed bridging is generally cheaper, with lower rates and higher LVRs because the exit is certain.
Open bridging is more flexible but priced higher, with lower LVRs and tighter exit conditions.
The exit strategy is the single most important factor in any bridging loan assessment.
Non-bank and private lenders may suit business-purpose bridging, investment property security, and urgent settlements.
Borrowers should test the numbers against a realistic sale price and a secondary exit, not the best-case outcome.
Talk to a private lending specialist
If you are weighing an open or closed bridging structure, the right call usually comes down to the exit, the security, and the settlement window. Speak with the team at Innovate Funding to explore options across private and non-bank bridging lenders. Contact us to discuss your scenario.
This article is general information only and not financial, legal, or tax advice. All loan products are subject to lender assessment, valuation, and credit approval.
