Securing an auction property without selling first
Bridging finance lets you purchase property at auction before your current home sells. You borrow against equity in your existing property to fund the deposit and settlement, then repay the loan once your original property is sold.
For orthodontists, auction purchases often involve time pressure that doesn't align with the timeline of selling a practice-adjacent home or investment property. Auctions require unconditional purchase with settlement typically within 30 to 60 days, which creates a gap if your existing property needs more time to sell or if you want to avoid settling for a lower price under pressure.
How bridging finance works for auction purchases
A bridging loan provides short-term funding by using your current property as security. The lender assesses the combined value of both properties and your ability to service both loans temporarily. You're borrowing against equity you already own, which means the approval process focuses on loan to value ratio across both properties rather than just income.
Consider an orthodontist who finds a property at auction that suits their family's needs. Their current home has $400,000 in available equity, and the auction property requires a $150,000 deposit plus settlement costs. A bridging loan uses that equity to fund the purchase, with the loan structured to last typically six to twelve months while the original property is marketed and sold.
The mechanics involve two securities and capitalised interest. The lender holds a mortgage over both your existing property and the new auction property. Rather than making monthly repayments during the bridging period, interest accrues and is added to the loan balance, then repaid in full when your original property settles. This structure removes the pressure of servicing two full loan repayments simultaneously, which matters when managing both a mortgage and practice-related financial commitments.
Bridging loan costs and how they compare
Bridging finance typically carries a variable interest rate between 0.5% and 1% higher than standard home loan rates. Lenders also charge establishment fees, valuation fees for both properties, and sometimes a monthly or ongoing service fee during the bridging period.
For a $300,000 bridging loan held for six months with interest capitalised, total interest costs might sit around $10,000 to $12,000 depending on the rate applied. Add establishment fees of $700 to $1,200, valuation costs for two properties at roughly $300 to $500 each, and legal fees for additional documentation. The total cost for a six-month bridge often falls between $12,000 and $15,000.
That cost needs to be weighed against the alternative. Selling your current property before bidding at auction means renting temporarily, moving twice, storing belongings, and potentially missing out on the auction property altogether if your sale timeline doesn't align. For orthodontists with established routines and family commitments, the financial cost of bridging can be offset by the certainty and convenience it provides.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Home Loans for Dentists today.
Approval timeline and what lenders assess
Approval for bridging finance can occur within 48 to 72 hours if your financial position is clear and both properties are straightforward to value. Lenders assess the combined loan to value ratio, typically capping it at 80% across both securities. They also evaluate your exit strategy, which in this context means evidence that your existing property will sell within the bridging period.
Lenders want to see a realistic sale price based on recent comparable sales, confirmation that the property will be listed with an agent, and an understanding of local market conditions. For orthodontists with variable practice income or recent changes in employment structure, the approval process may involve additional documentation around income stability. Self-employed income is assessed differently, and lenders often request recent tax returns or profit and loss statements even when bridging finance is primarily secured against property equity.
The valuation process involves both properties being assessed independently. If either property returns a lower-than-expected valuation, the loan to value ratio rises and may push the application outside the lender's acceptable range. This can delay approval or require additional funds to be contributed upfront.
When bridging finance doesn't suit auction purchases
Bridging finance works when your existing property has sufficient equity and a clear path to sale. It doesn't suit situations where the property is difficult to sell, located in a slow-moving market, or where the combined loan to value ratio exceeds lender limits.
In a scenario where an orthodontist owns a property in a regional area with limited buyer activity, the bridging period could extend beyond twelve months. Most lenders structure bridging loans with a defined end date, and extending that period involves additional fees, higher interest rates, and increased financial pressure. If your existing property hasn't sold by the time the bridging period expires, you're forced to either refinance both properties into a longer-term structure, sell at a reduced price, or face potential default.
Bridging finance also doesn't replace a need for borrowing capacity. Even though interest is capitalised, lenders still assess whether you can service both loans if the sale takes longer than expected. If your income doesn't support holding both properties for an extended period, the application may be declined or approved at a lower loan amount than required.
Alternatives to bridging finance for auction buyers
Some orthodontists use equity release combined with a standard home loan to fund an auction purchase without formal bridging finance. This involves refinancing your existing property to access equity, then using those funds for the deposit and settlement. The advantage is avoiding bridging loan interest rates and fees, but it requires selling your original property quickly to avoid servicing two full mortgages.
Another option involves delaying the auction purchase until your current property sells, which removes financing complexity but limits your ability to act on opportunities. For orthodontists in competitive property markets, waiting often means missing out on suitable properties altogether.
A third approach involves using family or practice-related assets as additional security, which can improve loan to value ratios and reduce reliance on the property being sold. Guarantor arrangements are less common for bridging finance but can be structured where parents or other family members provide security over their own property to support the purchase.
Structuring the exit to minimise holding costs
The exit strategy determines how long you're paying bridging finance costs. Listing your existing property before or immediately after securing the auction property shortens the bridging period and reduces total interest.
In our experience, orthodontists who engage an agent and prepare the property for sale before the auction purchase often complete the exit within three to four months. Properties listed after the auction settlement tend to extend the bridging period to six months or longer, particularly if styling, minor repairs, or marketing timelines add delay.
Pricing strategy also affects the exit. Listing at a realistic price based on recent comparable sales generates buyer activity faster than overpricing and adjusting later. The longer your property sits on the market, the more interest capitalises on the bridging loan and the greater the financial pressure to accept a lower offer.
Call one of our team or book an appointment at a time that works for you to discuss how bridging finance can be structured around your auction purchase and property sale timeline.
Frequently Asked Questions
How quickly can bridging finance be approved for an auction purchase?
Bridging finance can be approved within 48 to 72 hours if your financial position is clear and both properties are straightforward to value. Lenders assess combined loan to value ratio and your exit strategy, which means they need evidence your existing property will sell within the bridging period.
What are the typical costs of bridging finance for a six-month period?
For a six-month bridging loan, expect interest costs plus establishment fees, valuation fees for two properties, and legal costs. Total costs often fall between $12,000 and $15,000, depending on the loan amount and lender fees. Bridging finance typically carries interest rates 0.5% to 1% higher than standard variable rates.
What happens if my property doesn't sell during the bridging period?
If your property hasn't sold by the end of the bridging period, you'll need to refinance both properties into a longer-term loan structure, reduce the sale price to generate urgency, or negotiate an extension with additional fees. Lenders set a defined end date, and exceeding it creates financial pressure and potential default risk.
Can I use bridging finance if I'm self-employed as an orthodontist?
Self-employed orthodontists can access bridging finance, but lenders typically require additional income documentation such as recent tax returns or profit and loss statements. Even though the loan is primarily secured against property equity, lenders still assess your ability to service both loans if the sale takes longer than expected.
What loan to value ratio do lenders allow for bridging finance?
Lenders typically cap the combined loan to value ratio at 80% across both your existing property and the new auction property. If valuations come in lower than expected, the LVR rises and may push your application outside acceptable limits, requiring additional funds upfront or delaying approval.
