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Bridging Loans When Selling and Buying Property in Brisbane

Buying before you sell can give you more control over your next move. Here is how bridging finance works, what it actually costs, and how to assess whether the risk is worth it in Brisbane's market.

The sequencing problem is one of the most stressful parts of upgrading or downsizing in Brisbane. Sell first and you might find yourself in temporary accommodation, scrambling to find the right property under time pressure. Buy first and you are carrying two mortgages until your current home settles. Bridging finance exists to solve this problem, but it is not the right answer for everyone, and using it without understanding how it works can make a manageable situation genuinely difficult.

This is a practical overview of how bridging loans work in Queensland, what they cost, and what questions to ask before you commit to one.

How a bridging loan works

A bridging loan is short-term finance secured against both your existing property and the one you are buying. The lender calculates the maximum loan based on the combined value of both properties, less your existing mortgage. You use the bridging facility to complete your purchase, then when your current property sells, the proceeds are used to repay the bridging balance and the remaining debt is refinanced into a standard home loan on the new property.

Most bridging loans run for a term of 6 to 12 months, though some lenders allow extensions in certain circumstances. The interest is typically capitalised during the bridging period, meaning it accrues on the outstanding balance rather than being paid as a monthly repayment. This keeps your cash flow manageable during the sale campaign, but increases the total amount owing by the time your property settles.

Some lenders offer a "closed" bridging loan, which is available when you have an unconditional contract on your current property with a known settlement date. Others offer "open" bridging, where your current property has not yet sold. Open bridging carries more risk for the lender and often comes with tighter conditions and a shorter term.

What bridging finance actually costs

Bridging loans are more expensive than standard home loans. The interest rate is typically 0.5% to 1.5% above the lender's standard variable rate, though this varies significantly between lenders. Because the interest is capitalised rather than paid monthly, the cost compounds over the bridging period. On a $500,000 bridging balance over six months at 7.5% per annum, you would be looking at capitalised interest of roughly $18,500 to $19,000 before fees.

Application fees, valuation fees for both properties, and legal costs for the additional security arrangements add to the upfront cost. If your current property takes longer to sell than expected and you need to extend the bridging term, extension fees apply on top of the ongoing interest. The total cost of a bridging arrangement can easily run to $25,000 to $40,000 or more, depending on the loan size and the time it takes for your current home to sell.

This cost needs to be weighed against what you are getting: the ability to secure the right property at the right price, on your own timeline, without the pressure of a simultaneous settlement or a short-term rental. For many Brisbane inner-east upgraders, that flexibility has real value. The question is whether the numbers work for your specific situation.

The real risk: what happens if the sale takes longer

The biggest risk in any bridging arrangement is that your current property either takes longer to sell than expected, or sells for less than you assumed when you structured the finance. Both outcomes affect your ability to repay the bridging loan and can leave you in a position where the total debt exceeds what you planned for.

In Brisbane's inner-east suburbs, days on market for well-priced properties have generally been short over recent years, which reduces the time-on-bridge risk. But no market is guaranteed. Properties that are overpriced relative to comparable sales, or that have presentation issues that reduce buyer confidence, can sit for two or three months even in an otherwise active suburb. If you are going into a bridging arrangement, you need to be honest about what your property will realistically achieve and how long it is likely to take, not the optimistic version you might present to yourself when you are excited about the new purchase.

A conservative approach is to structure the bridging facility based on a price that is 5% to 10% below your target sale price, and to ensure you have sufficient serviceability to cover the bridging interest as a cash payment if your lender requires it. This gives you a buffer against the downside scenarios without preventing you from proceeding.

An alternative worth considering: the long settlement

Before defaulting to a bridging loan, it is worth considering whether a negotiated long settlement on your current property or the new one can achieve a similar result at lower cost. If you can sell your current home with a 90 or 120-day settlement, you have a three to four-month window to find and purchase the right property before settlement on your sale locks in. Similarly, if you are buying from a developer or a vendor with flexibility, negotiating a long settlement on the purchase can give you time to sell first without needing bridging finance at all.

This approach does not always work, particularly in competitive purchase situations where vendors want a standard 30 to 60-day settlement. But it is worth exploring before adding the cost and complexity of a bridging facility, especially if the property you are selling is well-prepared and likely to sell quickly once listed.

Questions to ask your mortgage broker

If you are considering bridging finance, the starting point is a conversation with an experienced mortgage broker rather than a direct approach to a single lender. Different lenders have materially different bridging products, different maximum LVRs (loan to value ratios), different capitalisation policies, and different risk appetites for open versus closed bridging. A broker who understands the Queensland market can identify which lenders are most likely to approve your scenario and on what terms.

Key questions to work through with your broker include: What is the maximum bridging loan available against both properties? What is the interest rate and is it fixed or variable during the bridging period? Is interest capitalised, or will I need to make monthly payments during the campaign? What happens if the property does not sell within the initial bridging term? What are all the fees involved and what is the total cost if the property sells in three, six, or nine months?

The answers to these questions will give you a clear picture of whether bridging finance suits your situation, and what the financial exposure looks like under different sale scenarios.