Bridging Loans: What Not to Miss Between Sales

Bridging finance covers the gap when you need to buy before you sell.

For dentists upgrading from a townhouse to a family home, or moving closer to a practice, the timing rarely lines up perfectly. A bridging loan lets you purchase the new property while your current one is still on the market, using the equity in your existing home as security. You avoid the pressure of selling under a strict deadline or paying for temporary housing while waiting for settlement.

How Bridging Finance Works for Property Purchases

A bridging loan uses the equity in your current property as security to fund the deposit and purchase costs of your next home. The lender assesses your borrowing capacity based on both properties, with the loan structured so that once your existing property sells, the proceeds repay the bridging portion. You'll typically hold two loans during the bridging period: one covering your new purchase, and the existing loan on the property you're selling.

Consider a periodontist in Brisbane who finds a property suited to a growing family but hasn't yet sold their current apartment. With $420,000 owing on the apartment valued at $680,000, they have $260,000 in accessible equity. The new property costs $950,000. The bridging loan covers the $95,000 deposit plus stamp duty and settlement costs, while a new home loan funds the remaining purchase price. Once the apartment sells, those proceeds clear the bridging loan and reduce the balance on the new home loan. The bridging period ran for four months, with interest capitalised and added to the loan balance rather than paid monthly.

Most lenders structure bridging loans for dentists with interest capitalisation during the bridging period, meaning you're not making additional monthly repayments until after your existing property settles. This keeps cash flow manageable while holding both properties.

Bridging Loan Approval and What Lenders Assess

Lenders approve bridging finance based on your ability to service both loans if the sale takes longer than expected. They'll assess your income, existing debts, and the combined loan to value ratio across both properties. For dentists with practice ownership or locum income, lenders familiar with dental professionals understand income structures that include a mix of salary, dividends, and distributions.

The bridging loan LVR calculation includes both your existing property and the new purchase. Most lenders cap the combined LVR at 80% to avoid lenders mortgage insurance, though some will approve higher ratios depending on your deposit size and income. If your current property is valued conservatively or the new purchase pushes the combined LVR above 80%, you may need to provide additional security or accept a higher interest rate during the bridging period.

Bridging loan applications require a clear exit strategy, which is typically the sale of your existing property. Lenders want evidence the property is actively marketed, usually within 30 days of bridging loan settlement. You'll need a signed agency agreement, and some lenders request a desktop valuation or full valuation on both properties before approval. The bridging loan term is generally six months, with some lenders offering 12 month bridging for properties in slower markets or where a longer sale period is anticipated.

Bridging Finance Costs and Interest Rate Structure

Bridging loan interest rates sit above standard variable rates, typically by 1% to 2%, reflecting the short term nature and higher risk for the lender. Interest is usually capitalised, meaning it's added to the loan balance each month rather than paid out of pocket. On a $150,000 bridging loan held for four months at a capitalised rate, the total interest cost might be $3,000 to $4,000, depending on the rate your lender offers.

Bridging finance costs also include application fees, valuation fees for both properties, and settlement fees. Some lenders charge a separate establishment fee for the bridging portion, while others roll it into the overall loan structure. Legal fees for managing two settlements close together add another layer of cost. Budget for $3,000 to $6,000 in total fees beyond the capitalised interest, depending on your lender and property values.

If your property sells quickly, the bridging period shortens and the overall interest cost reduces. If the sale takes longer than anticipated, you'll continue paying interest on the bridging loan amount until settlement. Most lenders allow one extension of the bridging loan term, but this usually requires reapplication and additional fees.

What Happens If Your Property Doesn't Sell During the Bridging Period

If your existing property hasn't sold by the end of the bridging loan term, lenders typically offer a three-month extension, though you'll need to demonstrate continued marketing efforts and may face a higher interest rate. Some lenders require you to reduce the asking price or switch agents as a condition of extension. If the property still doesn't sell after the extension, you may need to refinance the bridging loan into a standard investment loan and hold both properties longer term.

This scenario requires sufficient income to service both loans simultaneously without relying on the sale proceeds. For dentists with strong cash flow from practice ownership or specialist income, holding two properties temporarily is manageable, but it does reduce your borrowing capacity for other purposes until one is sold. Planning for this possibility before committing to bridging finance means assessing whether your income can cover both mortgages if the sale timeline extends beyond six months.

Bridging Loan Alternatives Worth Considering

Some dentists use equity release loans to access funds from their existing property without selling, particularly if they're considering holding it as an investment longer term. This approach avoids bridging finance costs but requires sufficient borrowing capacity to service both loans from the outset. Another option is negotiating a longer settlement period on your new purchase, giving you time to sell your existing property before the new one settles. This depends on the seller's flexibility and isn't always available, particularly in competitive markets where buyers offering shorter settlements have an advantage.

For properties at auction or off-market sales where timing is tight, bridging finance often remains the most practical option. It gives you certainty to proceed with the purchase while your current property finds the right buyer at the right price, rather than rushing a sale to meet an unconditional purchase deadline.

If you're weighing up whether bridging finance fits your timeline and financial position, call one of our team or book an appointment at a time that works for you. We'll work through the numbers on both properties, compare lenders who understand dental income structures, and make sure the bridging loan term and exit strategy align with your sale expectations.

Frequently Asked Questions