What is the maximum LVR for bridging loans?

Most bridging loans in Australia are structured up to a 65–75% loan-to-value ratio, depending on the property type, location and proposed exit strategy. Each transaction is assessed individually.

Can interest be capitalised on a bridging loan?

Yes. Many bridging loans allow interest to be capitalised, meaning the borrower does not make monthly interest payments during the loan term. The interest is added to the loan balance and repaid when the loan exits.

How Bridging Loans Work in Australia

Q: How quickly can a bridging loan settle?

Bridging loans can often settle within 3–7 business days, depending on the valuation, documentation and complexity of the transaction. Specialist lenders are typically faster than traditional banks.

Q: Are bridging loans regulated?

A bridging loan provided for personal or consumer purposes may be regulated under the National Consumer Credit Protection Act. Loans used primarily for business or investment purposes may fall outside the consumer credit regime, depending on their structure and circumstances.

Q: What happens if my property does not sell?

If the property takes longer to sell than expected, the lender may consider extending or refinancing the facility. This will depend on the borrower's equity position, the remaining loan term, market conditions and the lender's credit criteria.

A bridging loan works by lending against the equity in property you already own, so you can complete a transaction now and repay the loan when a defined event happens later. That event is usually the sale of a property or a refinance, and lenders call it the exit.

In short: the lender values your security property, lends up to a set percentage of it, and structures the loan around how it will be repaid rather than around your monthly income. While you hold both properties you owe the peak debt. When the sale settles, the proceeds reduce that to the end debt. Interest is often added to the balance rather than paid monthly. Terms commonly run 6 to 12 months, and consumer rates start from around 7.49% p.a., subject to eligibility.

This page covers the mechanics in detail. For what a bridging loan is and when to use one, start with bridging loans in Australia, or browse the use cases we fund.

How does a bridging loan work, step by step?

1. Property equity is used as security

The lender assesses the value of the property or properties offered as security. Facilities are typically structured up to 65% to 75% loan-to-value ratio depending on the property type, its location, the borrower profile and the strength of the exit. You may use one property or several. A borrower purchasing a new home before selling the current one commonly secures the facility against both, which is how the combined LVR is calculated. This is the standard structure for buying a house before selling yours.

2. The loan is structured around an exit strategy

Bridging finance is exit-focused lending. The lender's first question is not what you earn, it is how the loan gets repaid. Common exits are the sale of an existing property, a refinance to a bank or long-term lender, the sale of development stock, or a business refinance. A clear, evidenced exit is the single biggest factor in both approval and pricing. Read more on bridging loan exit strategies.

3. Peak debt and end debt are calculated

These two numbers decide whether the transaction works at all. They are explained in full in the next section.

4. Valuation and due diligence

Before approval, lenders typically require a property valuation, a title search, identification verification and loan documentation. Depending on complexity, this can be completed in days rather than weeks.

5. Settlement, then exit

Once approved, the facility settles through a solicitor and funds are released. You then exit when the planned event occurs, and the facility plus any capitalised interest and fees is repaid.

Peak debt and end debt explained

Every buy-before-sell bridging calculation reduces to these two figures.

Peak debt is the maximum you owe while you hold both properties. In simplified form:

Existing mortgage + new purchase amount + purchase costs + capitalised interest and fees, less any cash contribution

End debt is what remains after your existing property sells and the net proceeds are applied:

Peak debt, less net sale proceeds

Net sale proceeds means the sale price after agent commission, legal costs, discharge costs and other selling expenses. Lenders assess whether you can afford or refinance the end debt, because that is the debt you are left living with. Our guide to peak debt in bridging loans works through the variations different lenders use.

Bridging loan example: buying before selling

A homeowner buys before selling. Their position:

Existing property value: $1,800,000
Existing mortgage: $600,000
New property purchase: $1,400,000
Combined security value: $3,200,000
Peak debt: $600,000 plus $1,400,000 equals $2,000,000, before purchase costs. Against $3,200,000 of combined security, that is a peak LVR of 62.5%, inside the usual range.
Interest: over a 6 month term at 7.49% p.a. capitalised, roughly $74,900. The balance at sale is therefore about $2,074,900.
Exit: the existing property sells for $1,800,000. After around $45,000 in agent and legal costs, net proceeds are $1,755,000.
End debt: $2,074,900 less $1,755,000 equals approximately $319,900, refinanced into a standard home loan against the new $1,400,000 property. That is an ongoing LVR of about 23%.

Stamp duty and purchase costs are additional and were met from savings in this example. Actual figures depend on the valuation, the lender's assessed sale value and its treatment of interest and fees.

Bridging loan example: refinancing a maturing facility

Not every bridging loan involves a sale. This is the second most common structure. A borrower has a commercial facility maturing, with a bank refinance approved but ten weeks from settlement. The existing lender will not extend.

Property value: $2,400,000
Facility to be repaid: $1,300,000
Bridging facility: $1,300,000, an LVR of approximately 54%
Term: 3 months at 8.5% p.a. capitalised
Interest cost: approximately $27,625, giving a payout figure of about $1,327,625.
Exit: the bank refinance completes and repays the bridging facility in full. Read more on refinancing a bridging loan.

Establishment, valuation and legal fees are additional.

Want these numbers for your own scenario? Send us the property values, your existing mortgage balance and your intended exit, and we will come back with an indicative peak debt, combined LVR and total cost. Request an assessment, or model it yourself with the bridging loan calculator.

How is interest calculated on a bridging loan?

Two structures, and the difference matters more than the headline rate.

Serviced interest is paid monthly from your own cash flow. On a $500,000 facility at 8.5% p.a., that is roughly $3,542 a month, or about $21,250 across a 6 month term, paid out of pocket.
Capitalised interest is added to the loan balance instead. On the same facility, you pay nothing monthly and repay approximately $521,250 at exit. This is what makes bridging workable when you are carrying two properties or have no rental income during the term, and it is the reason bridging suits borrowers whose income would fail a standard serviceability test.

The trade-off is that a capitalised balance grows, which lifts your LVR over the term and reduces the buffer if the sale price disappoints. Some lenders calculate simple interest and others compound monthly, so confirm the method rather than assuming. See capitalised interest explained and the full bridging loan costs and fees.

Open vs closed bridging loans

The difference is whether your exit is already contracted.

A closed bridging loan applies where the existing property has sold or exchanged. The exit date is known, lender risk is lower, and pricing and conditions are generally better. The lender will want the signed contract and settlement date.
An open bridging loan applies where the property has not yet sold. The exit is expected but not contracted, so lenders apply a more conservative LVR and may price for the uncertainty. Expect to provide an appraisal, a marketing plan and a realistic sale timeframe.

Open does not mean no exit is required. The lender still needs a credible plan to sell or refinance within the term.

How long does a bridging loan take?

Timing is driven by valuation turnaround, how complete your documentation is, and legal work, rather than by a processing queue.

Where the security is straightforward and documents are ready, specialist bridging facilities can settle within several business days once valuation, legal, identification and lender requirements are satisfied. Complex security, company or trust structures, or consumer-purpose applications requiring full assessment take longer.

No timeframe should be treated as guaranteed until the lender and both solicitors confirm readiness. If you are working to a fixed date, say so at the first conversation. See settlement timing gaps if a deadline is already at risk.

What documents do you need?

Identification for applicants, directors and guarantors
Current mortgage statements or payout figures
Council rates notice for each security property
Contract of purchase, and contract of sale if the existing property has sold
Evidence of the expected property value
Details of assets and liabilities
Evidence of income and living expenses for consumer applications
Entity and ABN or ACN details for commercial applications
A written exit strategy with supporting evidence
Solicitor or conveyancer details

Having these ready shortens the front end, though valuation and legal timeframes still apply. See bridging loan eligibility for what lenders assess.

Common uses for bridging loans

Each of these has a dedicated guide within our use cases section.

Buying before selling: secure the next property without a subject-to-sale clause.
Buying at auction: auction contracts are unconditional, so funding has to be in place before you bid.
Accessing equity before selling: release capital that is locked in a property until settlement.
Renovating before selling: fund pre-listing works and repay from the sale.
Covering a settlement gap: bridge two dates that do not align.
Downsizing: buy the smaller property first and sell without pressure.
Development completion: hold a completed project until refinance or sell-down.

Who uses bridging finance?

Bridging is used by property investors, developers, homeowners, business owners, self-employed borrowers and borrowers declined by traditional lenders on serviceability despite holding substantial equity. See who we help for how each is assessed.

Key features

Short term: most facilities run 6 to 12 months.
Asset based: approval rests on property value, LVR and exit clarity rather than long-term serviceability.
Flexible repayment: interest may be capitalised rather than serviced monthly.
Faster settlement: considerably quicker than a standard mortgage where the security is straightforward.
Consumer or commercial: see consumer bridging loans and commercial bridging loans.

Risks to consider

The sale takes longer than expected. Capitalised interest accrues and the balance grows. An extension is not guaranteed.
The sale price disappoints. A lower price leaves a larger end debt. Work from comparable evidence, not hope.
The refinance is not available. Future refinancing depends on policy, valuation and conditions at that time. It should never be assumed.
Cost. Bridging is priced above long-term mortgages. Judge the total dollar cost over the term, not the headline rate.
Enforcement. This is secured lending. If it is not repaid and no acceptable arrangement is reached, the lender can act against the security.

Conservative LVRs, a realistic sale price and a genuine time buffer materially reduce all of these.

Frequently asked questions

How does a bridging loan work?

The lender advances funds secured against property you already own, structured around a defined exit such as a sale or refinance. You hold the peak debt while both properties are held, and the sale proceeds reduce it to the end debt. Interest is often capitalised rather than paid monthly.

What is peak debt?

The maximum owed while you hold both properties. It includes the existing mortgage, the new purchase, purchase costs and any capitalised interest and fees, less any cash contribution.

What is end debt?

What remains after the existing property sells and the net proceeds are applied. It generally needs to be repaid or refinanced into a longer-term loan, and lenders assess your capacity to carry it before approving the facility.

What LVR applies?

Most facilities are structured up to 65% to 75% combined LVR, depending on property type, location, borrower profile and exit strategy. Each transaction is assessed individually.

Do I make monthly repayments?

Often not. Many facilities allow interest to be capitalised, meaning it is added to the balance and repaid at exit. Others require monthly servicing. Availability depends on the lender, LVR, loan purpose and your financial position.

How is the interest calculated?

On the drawn balance for the days the facility is used, at the agreed rate. Capitalised interest is added to the balance rather than paid monthly. Some lenders apply simple interest and others compound monthly, so confirm the method before you sign.

How quickly can a bridging loan settle?

Where security is straightforward and documents are ready, specialist facilities can settle within several business days once valuation, legal and lender requirements are complete. Complex security or consumer-purpose applications take longer.

What is the difference between an open and closed bridging loan?

A closed bridging loan has a contracted exit, usually a signed sale with a known settlement date, and generally prices better. An open bridging loan is used where the property has not yet sold, so lenders apply a more conservative LVR.

Are bridging loans regulated?

Where the credit is predominantly for personal, domestic or household purposes it may fall under NCCP regulation and responsible lending obligations. Facilities structured for business or investment purposes may be NCCP exempt. The applicable framework depends on the borrower and the purpose of the funds.

Can a bridging loan be used to refinance rather than to buy?

Yes. Refinancing a maturing facility while a longer-term approval is completed is one of the most common structures, as shown in the second worked example above.

What happens if my property does not sell?

Contact the lender or broker before maturity. Options may include an extension, a refinance, a revised price or contributing additional funds. None is guaranteed, which is why a realistic sale price and a time buffer belong in the original structure.

More answers in our bridging loan FAQs, or browse the resources hub.

Speak with a bridging finance specialist

Every scenario prices differently. Structure depends on the property values, your existing debt, the combined LVR, the exit timeline and your borrower profile. Bridging Loans Australia arranges short-term, property-secured facilities nationally through a panel of specialist lenders. Contact our team to have your scenario assessed, or read more about our brokerage.

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